The Tamilnadu State Appellate Authority for Advance Ruling (AAAR) in a recent matter before it noted that any services which are not naturally bundled with the ‘principal supply of service’ rendered by an enterprise cannot be regarded as a “composite supply” in terms of provisions under the Goods and Service Tax (GST) regime.
The Appellate Application was filed by Tamil Nadu Generation and Distribution Corporation (TANGEDCO), a Government of Tamil Nadu undertaking involved in the generation and distribution of electricity.
TANGEDCO, being a “distribution licensee” under the Electricity Act, 2003 levies charges under various overheads as part of their business of electricity distribution while claiming GST exemptions on suitable overheads.
The Applicant has preferred this present Appeal being aggrieved by the ruling of the Authority for Advance Ruling (AAR) disentitling GST exemptions for all the activities conducted by the Applicant, except Belated Payment Charges, Dishonoured cheque service charge and Network/Wheeling charges.
Extensive submissions were made by the Applicant in light of the decision by the Gujarat High Court at Ahmedabad in the case of Torrent Power Ltd. vs. UOI (2018) wherein the Gujarat High Court struck down the exclusion clause within Para 4(1) of Circular No. 34/8/2018-GST dated 01.03.2018 stating that the notification is ultra vires to Section 8 of the CGST ( Central Goods and Service Tax ) Act, 2017.
The two-member Bench of the AAAR comprising Ashish Varma, I.R.S., Central Excise Member and D. Jagannathan, I.A.S., Commercial Taxes Member, after perusing the material on record, laid reference to Sl. No. 25 of Notification No.12/2017-CT(Rate) dated 28.06.2017, and opined that exemptions could be meted out so far as the scope of services rendered by the Applicant is included in “service of transmission or distribution of electricity”.
However, the AAAR firmly declared that the first adjudicatory body, i.e. AAR had erred in admitting the Applicant’s case and permitting certain exemptions while Torrent Power Ltd. vs. UOI (2018) remained sub-judice following a Special Leave Petition lodged by the Department against the Order of the Gujarat High Court. The AAAR disposed of the Application citing its inadmissibility due to lack of settled position in law owing to the Supreme Court’s impending decision, while clarifying that the numerous Services sought GST exemption on by the Applicant may not be allowable as they are not ‘composite’ in nature to the principal supply of transmission and distribution of electricity as per Section 8(a) of the CGST Act, 2017.
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