The Authority for Advance Ruling (AAR), Karnataka has held that the activity of charging electric batteries for Electric Vehicles (EVs) is considered a “supply of service”, attracting an 18% Goods and Services Tax (GST) rate.
The ruling is based on an application filed by M/s. Chamundeswari Electricity Supply Corporation Ltd., represented by Y C Shivakumar seeking clarity on the classification and tax implications of battery charging services for EVs.
The AAR clarified that the charging of electric batteries for EVs involves two components – ‘Energy Charges’ and ‘Service Charges’. The former refers to the units of energy consumed, while the latter encompasses the cost of setting up and running the charging stations.
The authority noted that contrary to the supply of electricity, the activity of charging EV batteries does not involve the sale of electricity as such. Instead, it is considered a service wherein electrical energy is converted to chemical energy stored in the battery.
The Ministry of Power, in its guidelines dated 13-04-2018, had also clarified that charging stations for EVs do not require a license under the Electricity Act, 2003, as they do not engage in transmission, distribution or trading of electricity. This guideline further reinforces the categorisation of EV battery charging as a service rather than the sale of electricity, the authority highlighted.
The authority comprising Dr. M P Ravi Prasad (SGST Member) and Sri. Kiran Reddy T (CGST Member) ruled that the entire activity of charging EV batteries falls under the category of “supply of service” and should be classified under SAC 998714, which covers Maintenance and Repair of Transport Machinery and Equipment, including electrical system repair and battery charging services for motor cars.
The AAR also addressed the issue of input tax credit (ITC).
According to the ruling, the GST collected on the service provided can be set off against the ITC received by the applicant company on its inputs and input services, as per the provisions of Sections 16 and 17 of the CGST Act 2017 read with Rules 42 and 43 of the CGST Rules, 2017.
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