2023 (12) TMI 832 - HC - GST

Exemption from GST - Validity of clarification issued in para 4(1) of the Circular No. 34/8/2018-GST dated 01.03.2018 by the Government of India - charges for metering equipment testing fee for meter labour charges from customers for shifting of meters charges for bills - activities undertaken by a distribution utility/licensee in accordance with the provisions of the Electricity Act 2003 are exempt from levy of tax or not - HELD THAT - The petitioners have not deposited any amount with the Registry of this Court. Mr. Arvind Datar learned Senior Counsel appearing the petitioners submits that depositing the tax in this Court would further complicate the issues. He submits that certain industrial consumers are entitled to avail Input Tax Credit in respect of the GST paid to the petitioners. He further submits that in the circumstances the GST authorities would not receive the tax collected by the petitioners and yet certain other customers would be entitled to avail of credit for the same - There is merit in the said contention that the direction to deposit GST with this Court on a monthly basis may give rise to further complications. Since the impugned circular has been set aside and it is clarified that the supplies mentioned in the impugned circular are bundled supplies and form an integral part of the supplies of distribution of electricity the said supplies are not chargeable to GST. Consequently the petitioners are also not entitled to collect such charges from their customers. In this view we consider it apposite to direct that any GST collected by the petitioners after 08.11.2023 be refunded to customers from whom the said GST has been collected. Application disposed off.

Summary

Issues Involved:
1. Validity of the clarification issued in para 4(1) of Circular No. 34/8/2018-GST dated 01.03.2018.
2. Exemption of charges such as application fee, meter rent, testing fee, etc., under GST.
3. Applicability of the impugned circular prospectively.

Summary:

Issue 1: Validity of the Clarification in Para 4(1) of Circular No. 34/8/2018-GST
The petitioners challenged the clarification that certain charges collected by electricity distribution utilities are taxable under GST as per Circular No. 34/8/2018-GST dated 01.03.2018. The Court noted the Gujarat High Court's decision in Torrent Power Ltd. v. Union of India, which struck down the impugned circular as ultra-vires to Section 8 of the CGST Act and Notification No. 12/2017-CT (R). The Delhi High Court concurred with this decision, thereby invalidating para 4(1) of the circular.

Issue 2: Exemption of Charges Under GST
The petitioners contended that charges such as application fee, meter rent, testing fee, etc., are integral to the distribution of electricity and should be exempt from GST. The Court referenced the Gujarat High Court's ruling, which classified these as composite supplies related to the principal supply of electricity distribution, thus exempt from GST. The Court directed that any GST collected post-08.11.2023 be refunded to customers.

Issue 3: Applicability of the Impugned Circular Prospectively
The petitioners argued that the impugned circular should apply prospectively. However, since the circular was set aside, the Court directed that the petitioners are not entitled to collect GST on the specified charges, and any collected GST must be refunded to the customers.

Final Directions:
The Court directed the petitioners to refund any GST collected from customers post-08.11.2023 and clarified that customers retain the right to seek refunds for GST paid prior to this date. The petition was disposed of with these directions, and the scheduled hearing on 08.01.2024 was cancelled.