The Delhi High Court recently observed that the electricity distribution utilities not entitled to collect gst from their customers.
The Central Government in exercise of its powers under Section 11 of the Central Goods and Services Tax Act, 2017 (hereafter ‘the CGST Act’), had issued a notification being Notification No.12/2017- Central Tax (Rate) dated 28.06.2017. In terms of the said notification, the intra-State supply of services (transmission or distribution of electricity by an electricity transmission or distribution utility) is exempted from the Goods and Services Tax (GST).
The petitioners are essentially aggrieved by the issuance of the circular being Circular No. 34/08/2018-GST dated 01.03.2018 (‘the impugned circular’). In particular, the petitioners are aggrieved by the clarification issued at serial No. 4 of the impugned circular.
According to the petitioners, the charges as referred above are included in the charges for provision of services. It was contended that charges for metering equipment, testing fee for meter, labour charges from customers for shifting of meters, charges for bills and application for releasing connection of electricity are all integral part of services of distribution of electricity.
Thus, although the Gujarat High Court had set aside the circular, the benefit of the same had not percolated to the customers, who were availing the supplies made by the petitioners. In the aforesaid circumstances, the Court had directed the petitioners to deposit the GST collected from the customers for the services in question with the Court.
A Division Bench of Justices Vibhu Bakhru and Amit Mahajan observed that “Since the impugned circular has been set aside and it is clarified that the supplies mentioned in the impugned circular are bundled supplies and form an integral part of the supplies of distribution of electricity, the said supplies are not chargeable to GST. Consequently, the petitioners are also not entitled to collect such charges from their customers. In this view, we consider it apposite to direct that any GST collected by the petitioners after 08.11.2023, be refunded to customers from whom the said GST has been collected.”
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