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18% GST applicable on Street Lightning Activity under Energy Performance Contract: AAAR [Read Order]

18% GST - applicable - Street Lightning Activity - Energy Performance Contract - AAAR - Taxscan

The Karnataka Appellate Authority of Advance Ruling (AAAR) ruled that 18% GST applicable on street lightning activity under  Energy Performance Contract.

The applicant, M/s Karnataka State Electronics Development Corporation Ltd. (KEONICS) is a Karnataka State government entity, engaged in providing street lighting services under Energy Performance Contract to the Thane Municipal Corporation (TMC) for a period of 7 years. The main task of the applicant is to operate and maintain 12,000 street lighting fixtures and respective feeder panels i.e. installation of LED fixtures, smart electric panels for automation, metering and comprehensive maintenance.

The applicant sought advance ruling on the issue of whether the street lighting activity under the Energy Performance Contract is covered under the ambit of supply of goods or supply of service under the CGST/ SGST Act, 2017. If in case it is a supply of service how much should be the period of service.

The AAR ruled that street lightning activity under Energy Performance Contract amounts to composite supply where principle supply is of goods. The applicant is liable to pay 12% of the tax and is not entitled to any exemption under Entry 3 or 3A of Notification No. 12/2017.

The lower authority observed that the instant transaction amounts to composite supply, where the supply of goods being principal supply, the issue pertaining to the time period of service is reductant to mention here.

The two member bench of D.P. Nagendra Kumar and M.S. Srikar set aside the ruling of the lower authority and held that the street lighting activity under the Energy Performance Contract is considered as a composite supply of goods and services with the supply of service being the predominant supply. The service is classified under Heading 999112.

The AAAR further ruled that the rate of tax applicable on the above supply is 9% CGST and 9% SGST as per entry Sl.No 29 of Notification No 11/2017 CT (R) dated 28.06.2017. The Appellant is not eligible for the benefit of exemption under entry 3 or 3A of exemption Notification No 12/2017 CT (R) dated 28.06.2017.

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