GST to be Charged for Power Utility Transactions Except for T&D: AAR

The AAR Tamilnadu, ruled that only the transactions related to distribution and transactions of the power utilities sector will be exempt from Goods and Services Tax (GST) Check out the latest official updates under GST (Goods and Services Tax) by the CBIC department. Also, we include notifications & circulars/orders regularly. Read more. All the other transactions between the power utility firms will attract GST according to the nature of the transaction.

The ruling was provided in the issue raised by two subsidiaries of the Tamilnadu Electricity Board, namely, Generation and Distribution Corporation (TANGEDCO) and Tamil Nadu Transmission Corporation (TANTRANSCO). TANGEDCO was the applicant in the case.

The AAR ruled that the transaction between Generation and Distribution Corporation (TANGEDCO) and Tamil Nadu Transmission Corporation (TANTRANSCO) will attract GST in all the transactions related to supply of operation and maintenance materials which are used by the companies for day to day operations. The GST will also be charged on transfer of assets and movement, and deployment of employees, said Harpreet Singh, partner at KPMG.

Apart from these, GST will also apply on transactions on the testing fee for meters, transformers, capacitors, releasing connection of electricity, rental charges against metering equipment, labour charges for shifting of meters or shifting of service lines and charges of the duplicate bill.

Read Also: What If Electricity Comes Under GST India? Currently, electricity is not under GST but whenever it comes under new tax regime then what will be the impact of electricity cost and your electricity bill. Read More

However, the AAR has also said that GST will not apply on the transactions of funds between the companies if such fund is transferred for the settlement or repayment of the existing loans to avail some new loans without the interest component.

The AAR (Authority for Advance Rulings Get to know about AAR (Authority for Advance Rulings) under GST India along with its mechanism. Also, we have described its objectives, powers, orders. Read More further informed that GST will also not apply on transactions related to any income from transmission charges, reactive energy charges, scheduling and systems operating charges, and others as received from the customers by the companies if such transaction is settled by the consumer through TANTRANSCO in TANGEDCO’s bank account.

Warning the companies, Singh said, “Any incorrect nomenclature, accounting entry could result in GST liability.” He said that the companies should document the nature of all the transactions accordingly and correctly. He also said that the litigation can not be ignored unless the transaction satisfies the tax authorities that such transactions are purely for the purpose of financial support, loan etc.