18% GST on Construction of EHV Substations/Lines for Dedicated User of MSETCL through Contractor: AAR [Read Order]

MSETCL, a government-owned transmission utility in Maharashtra, sought a ruling on the taxability of new EHV substation or line projects funded by entities requiring dedicated power supply, such as Indian Railways or industries. The expenses for construction are borne by the beneficiary through advance deposits and supervision charges.

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Chartered Accountant Arpit Jain, appeared on behalf of the applicant while Sudarshana J. Patil, Deputy Commissioner of SGST appeared for the Revenue.

MSETCL, through chartered accountant Arpit Jain submitted that the works are undertaken to provide new EHV infrastructure exclusively for the use of a consumer, and argued that such activity is part of electricity transmission, and therefore exempt. MSETCL further clarified that the ownership of the created infrastructure is not transferred, but remains under MSETCL’s ownership, with only usage rights extended to users.

The Bench of D.P. Gojamgunde, Joint Commissioner of State Tax, and Priya Jadhav, Joint Commissioner of Central Tax observed that the nature of the work is not incidental to the transmission of electricity, but rather the execution of civil and electrical works for dedicated usage.

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Relying on the definition and exclusions under Notification No. 12/2017 and Circular No. 178/10/2022-GST, the AAR ruled that the construction of substations and lines for specific end users amounts to a taxable supply of service under SAC 998339.

The Authority further stated that such services are not supplied to electricity consumers at large but to project-specific entities for infrastructural expansion and shall attract 18% GST.

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On the issue of availability of input tax credit (ITC), AAR held that the same would depend on whether the resultant asset qualifies as plant and machinery under Section 17 of the CGST Act, and such assessment requires case-specific facts. The time and value of supply would be determined under Sections 13 and 15 respectively.

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