Non-Tariff Charges Except Cheque Dishonour Fee is exempted from GST: AAAR [Read Order]

While re-considering an appeal against the advance ruling, the Appellate Authority for Advance Ruling (AAAR) has held that the non-tariff charges are generally not taxable under the Goods and Services Tax ( GST ) Act, 2017.

The appeal filed by the Tata Power Ajmer Distribution (TPADL) challenged the order of the AAR wherein it was held that 18 percent GST is applicable on the non-tariff charges in the Electricity Bill.

Non-tariff charges, includes the application fee for releasing the connection, rentals charged against metering equipment and labour charges for shifting of meters and service lines, are liable to tax at 18% under the GST, the authority said.

Hearing the appeal, the Appellate authority said that the value of supply is the consideration charged by the appellants from the consumers of electricity on account of consumption of electricity by them.

“Coming to the taxability of the supply of electricity, we find that electrical energy has been classified under tariff item No. 27160000 under Customs Tariff Act, 1975 and value of its supply has been exempted vide entry No.104 of the notification No. 02/2017- Central Tax (Rate) dated 28.06.2017. As per Section 15(2) ibid, delayed payment charges should form part of the value of the supply of electricity. When the value of supply of itself stands exempted by virtue of the above exemption notification dated 28.06.2017,” the authority said.

With regard to the question whether the cheque dishonour fee collected by the appellants is liable to GST or not, the authority observed that “the appellants is collecting this fee from those consumers of electricity whose cheque upon presenting to the bank are being dishonoured. The appellants have pleaded that since the bank is charging penalty from them when any cheque gets dishonoured, this fee is nothing but compensation for penal charges paid by them to the bank.”

if any person tolerates any act or a situation and recovers a certain amount for such tolerance then it is the supply of service. In the instant case, the appellants is tolerating the situation of dishonour of cheques, tendered by the consumers of electricity for payment of electricity bill, by charging a certain amount from the consumers, hence, it is a supply of ,Mge41); s of the above clause 5( e) . Needless to mention that Banks are also paying GST on whatever name) received from customers when their cheques get dishonoured. Therefore, cheque dishonour charges, being a supply of service and not exempted anywhere, °mate’ 6: chargeable on the value of its supply.”