EV Vehicles charging stations to provide ‘battery charging service’ and not supply or distribution of ‘electricity’ – liable to GST @ 18%

[Vivek Jalan]

Classification under GST Law can sometimes be contrary to general understanding. The charging of a battery in EVs requires electricity and an electricity company will provide electricity supply to the public charging stations which will in turn provide electricity to all-electric vehicle users who can access these public charging stations for battery charging. The general understanding is that the EV vehicle battery shall be charged with electricity (which is an exempt goods)’, but The AAR dug deep and concluded that it is a battery Charging Service’. The AAR Karnataka has opined that the charging of EV vehicles will be a service liable to GST @18% in the case of IN RE: M/S. CHAMUNDESHWARI ELECTRICITY SUPPLY CORPORATION LIMITED - 2023 (2) TMI 1083 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA 

The decision is based on the clarification issued by The Ministry of Power that charging of an EV battery by a charging station involves 'a service' requiring the consumption of electricity by the charging station. The activity does not involve any sale or distribution of electricity. It stated that “The charging of battery essentially involves the utilization of electrical energy for its conversion to chemical energy, which gets stored in the battery. Thus, the charging of the battery of an electric vehicle by a charging station involves a service requiring the consumption of electricity by the charging station and earning revenue for this purpose from the owner of the vehicle. The activity does not in any way include the sale of electricity to any person as the electricity is consumed within the premises owned by the charging station, which may be connected to the distribution system or otherwise for receiving electricity. By the same logic, the activity does not involve the further distribution of transmission of electricity". Further, it is mandatory to have a licence to supply electricity. In the instant case, the Public Charging Stations (PCS) do not have a licence as required under the Electricity Act 2003 as it is considered that the supply by PCS is not electricity.

The applicant would issue tax invoices and collect the "Electric Vehicle Charging Fee", which would include two components - (a) 'Energy Charges', and (b) 'Service Charges'. 'Energy Charge' refers to the number of units of energy consumed and the 'Service Charge' refers to the services provided by the charging station, i.e., the cost of setting up the service station and running the same. The entire amount will fall under SAC 998714 and GST@18% should be charged on the entire value of the service.