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PJ/Case Law/2020-2021/3576

Whether ancillary services provided along with the transmission of electricity be exempt from tax treating them as Composite supply?
M/s Chamundeshwari Electricity Supply Corporation Limited (Karnataka AAR)-Advance Ruling No. KAR ADRG 22/2020, Dated 23.04.2020
Brief Facts:  M/s Chamundeshwari Electricity Supply Corporation Limited is engaged in distribution of electricity. They procure power from various industries, individuals and also procure from solar power generators. They supply and distribute power to various consumers and further apart from transmission of electricity they render ancillary services.
Issue:Whether ancillary services provided along with the transmission of electricity be exempt from tax treating them as Composite supply?
Applicant’s Contention:  The applicant has  stated that Intra and interstate supply of Electrical energy is goods being exempted from the payment of taxes as per entry number 104 and Chapter Heading 2716 00 00 of the notification number 2/2017-Central Tax (Rate) dated 28-06-2017 . They also stated that Transmission or distribution of electricity by an electricity transmission or distribution utility being exempted from payment of taxes as per entry number 25 of the notification number 12/2017-Central Tax (Rate) dated 28-06-2017. The applicant has further stated the definition of Composite supply under section 2(30) of CGST Act, therefore, the principal supply is distribution and transmission of electricity to the end-user and hence, ancillary charges associated with supply transaction is being exempted from GST.
The applicant has placed reliance on the following judgements wherein Deeming provision is intended to enlarge the meaning of a particular word or to include matters which otherwise may or may not fall within the main provisions.
  1. Doypack Systems (Pvt) Ltd. Vs. Union of India [1988 (36) ELT 201 (SC)],
  2. Oswal Agro Mills Ltd Vs. Collector of Central Excise [1993 (66) ELT 37 (SC)]
Further reliance has been placed on the recent judgement rendered by Gujarat High court in the matter of Torrent Power Ltd. wherein verdict has been passed in favour of the applicant and issued judgement against the Circular No. 34/8/2018-GST with regards to taxability of charges recovered for the activities directly connected with the distribution and transmission of electricity such as application fee, meter rent, testing fee, labour charges for shifting meters and shifting of service line, etc.
Reasoning of Judgement: Circular no. 34/8/2018-GST dated 01.03.2018 has been stated wherein it was clarifies that the other services such as meter rent, application fees, testing fees for meters etc. provided by companies to consumers are taxable. And the same contention as in the circular was upheld by Rajasthan AAR in the case of M/s TP Ajmer Distribution Limited vide RAJ/AAR/2018-19/AR-02 dated dated 11-05-2018.
It has been stated that the department has filed special leave petition vide Diary No(s). 24733/2019 dated 09-08-2019 in the Honourable Supreme Court against the order passed by Honourable High court of Karnataka in the case of M/s Torrent Power Limited of Gujarat High Court vide Special Civil Application NO. 5343 of 2018 dated 05-04-2018 is at present pending for the decision.
So ruling passed by the authorities is that
“The issue of the exemption activities carried out by the applicant with reference to administration and Pre and Post connection charges towards supply of Electricity is pending before Honourable Supreme court of India Vide SLP Diary No.’s 24733/2019 dated 09.08.2019. Since the matter is Sub-judice therefore advance ruling on aforesaid issue cannot be given.”
Comment:-As per definition of “composite supply”, it can be inferred that it is combination of two or more taxable supplies and the combination should not include exempt supplies. However, it is pertinent to mention that the government itself has clarified vide Circular No. 32/06/2018-GST dated 12.02.2018 that food supplied to in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare services and not separately taxable. The above clarification indicates that the composite supply can be combination of exempt and taxable supplies as well.
Moreover, it has been consistently been held by various Advance Ruling Authorities that health care services provided in package including stay facility, medicines, surgical implants, food etc. is composite supply wherein principal supply is that of health care services which is exempt from GST. Reliance may be placed on the decision given in the case of CMC VELLORE ASSOCIATION [2020 (32) G.S.T.L. 601 (A.A.R.-GST-TN] and BABY MEMORIAL HOSPITAL LTD. [2020 (32) G.S.T.L. 59 (AAR-GST-KERELA]. The AAR cannot escape from the pronouncing the ruling provided that any case is pending before the court. Now what should be the progressive action of the assessee? He should wait for the decision and in this time gap, indirectly invite department to issue notice for wrong compliance requirements.
Prepared By CA Akanksha Bohra
 

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