GST on Services provided by Electricity Transmission or Distribution Utility: Allahabad HC stays Recovery Proceedings [Read Order]

In a recent case, with regards to the GST on services provided by the electricity transmission or distribution utility, the Allahabad HC granted interim relief. The court stayed the recovery proceedings until the date of filing of the counter affidavit by the department.

The matter is regarding the imposition of GST on ancillary services provided by electricity distribution companies, which has been a matter of contention across various judicial forums.

The petitioner, M/s Kanpur Electricity Supply Company Limited challenged the initiation of proceedings under Section 74 of the Central Goods and Services Tax Act, 2017, contending that the entire foundation of the show-cause notice and subsequent demand was based on Circular No. 34/8/2018-GST dated March 1, 2018.

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It was argued that the said circular has already been quashed by the Gujarat High Court in Torrent Power Limited vs. Union of India. This position has further been upheld by the Delhi High Court in BSES Rajdhani Power Limited vs. Union of India and by the Rajasthan High Court in Jodhpur Vidyut Vitran Nigam Limited vs. Union of India.

The petitioner also relied upon the clarification issued by the GST Council in Circular dated October 11, 2024, specifically Clause 9, which recommended that GST on services provided by electricity transmission or distribution utilities from July 1, 2017 to October 9, 2024 be regularized on an 'as is where is' basis.

The clause was further clarified to mean that payments made at a lower or nil rate during this period due to the tax position adopted by the utility shall be treated as full discharge of tax liability, and hence no further demand could be lawfully raised, asserted the petitioner.

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However, the counsel of the department prayed for time for filing the counter affidavit.

A division bench of Justice  Kshitij Shailendra and Justice Arun Bhansali allowed time to the respondent authorities to file a counter affidavit, granting them four weeks to do the needful. Meanwhile, the Court ordered a stay on the recovery pursuant to the order dated January 2, 2025 and the order-in-original dated December 4, 2024.

To Read the full text of the Order CLICK HERE

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