GST ITC Refund Restricted to Direct Supply of Electricity to Bangladesh: AP High Court Rules SEIL’s Supplies Via PTC Domestic [Read Order]

The Andhra Pradesh High Court has ruled that Goods and Services Tax (GST) Input Tax Credit (ITC) refund can only be claimed upon direct supply of electricity to Bangladesh Power Development Board (BPDB), and indirect supply of electricity via the Power Trading Corporation of India (PTC) cannot be eligible for the refund and they were held to be domestic supplies.

The petitioner, SEIL Energy Limited, is involved in the generation and supply of electricity to its purchasers. The petitioner owns and operates thermal power plants in the State of Andhra Pradesh.

The petitioner, in the course of its business, had been supplying electricity to BPDB. The said supply of electricity is done by the petitioner, directly to the Bangladesh Board, by way of an agreement. Apart from this, the petitioner had supplied electricity to PTC, which supplied this electricity to the Bangladesh Board.

In this case, PTC had entered into an agreement with the Bangladesh Board for the supply of electricity. PTC had also agreed with M/s Meenakshi Energy Limited to supply the said power to PTC, which would supply the power to the Bangladesh Board.

As Meenakshi Energy Limited was unable to supply electricity, PTC had entered into a power purchase agreement with the petitioner and the petitioner was substituted for Meenakshi Energy Limited in the power purchase agreement, executed between PTC and the Bangladesh Board.

The petitioner, had sought refund of the input tax credit, which accrued on account of the purchase of goods and services from various third parties, in the course of generation of electricity on the ground that the supply of electricity made by the petitioner to the Bangladesh Board directly as well as the supply made by the petitioner to the Bangladesh Board, through PTC, would be export supply, which are zero rated supplies, under the provisions of Section 16 of the IGST Act, 2017

SEIL argued that the PTC–BPDB–SEIL arrangement effectively created a tripartite contract, establishing privity with BPDB. The petitioner depended on minutes of meetings and amendment clauses showing BPDB’s right to terminate if SEIL failed to supply, contending this proved direct linkage.

Counsel stressed that under Section 2(5) of the IGST Act, export of goods simply means “taking goods out of India,” and therefore any supply resulting in electricity crossing the border should qualify, regardless of the point of sale.

The revenue maintained that the delivery point under both agreements was the Bohronpur sub‑station in West Bengal, within India. Thus, SEIL’s supply to PTC was completed domestically, and only PTC’s onward supply to BPDB occasioned export. Transmission charges were separately invoiced and taxed, proving they were not part of the composite export supply.

The Division Bench of Justice Raghunandan Rao and Justice Subendhu Samanta reviewed constitutional history under Article 286, CST Act jurisprudence, and IGST definitions. It noted that under CST law, only the sale that occasioned export qualified as exempt; penultimate sales were excluded unless specifically covered by Section 5(3).

It was observed that the IGST Act’s Section 2(5) defines export of goods as “taking goods out of India,” but the principle remains that only supplies directly linked to movement abroad qualify. And In SEIL’s case, the delivery point was in India, making its supply to PTC a domestic transaction.

Also, the export was occasioned by PTC’s contract with BPDB, not SEIL’s supply to PTC.

It was observed that the supply of electricity between the petitioner and PTC can only be called a supply for export of goods and not, per se, an export of goods. The petitioner, though mentioned in the agreement, is not a party to the contract of supply of electricity by PTC to the Bangladesh Board. The inevitable conclusion is that the supply of electricity, by the petitioner, to PTC is not an export supply of goods and is a supply within India. 40.

It was ruled that direct supplies by SEIL to BPDB qualify as zero‑rated exports, entitling SEIL to ITC refund and supplies to PTC are domestic supplies, excluded from zero‑rated turnover.

The court dismissed the writ petitions, leaving it open to the petitioner, to resubmit its applications, within a period of four weeks from today, for refund of ITC, relating to the supply made by the petitioner to the Bangladesh Board directly, by treating the supply of electricity to PTC, as domestic supply of electricity, in the formula set out in Rule 89.

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