2025 (6) TMI 579 - AAR - GST

Applicability of Goods and Services Tax (GST) on various works undertaken by a State Electricity Transmission Utility for Dedicated Consumers. Supply or not - Shifting/height raising of transmission towers/lines belonging to the applicant through a contractor on request of Dedicated Consumers - HELD THAT - The said services are neither services of transmission of electricity or any service incidental or ancillary to the said service. In fact this service is not even provided to the actual consumers or users of the electricity. It is a service of shifting of transmission lines so that there is no hindrance for the various persons such as National Highway Authority Railways etc. in widening of roads giving right of way etc. For the said shifting of the transmission lines which come in the way of their work these customers approach the applicant requesting them to shift the transmission towers or raise the height of the transmission lines or towers for which they offer compensation which includes the cost of the said work along with 15% Supervisory Charges. Since these services are not covered under S.No.25 and S.No. 25A of the Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017 the said services are taxable services. The said services are in the nature of agreeing to do an act for a consideration. As per Circular No. 178/10/2022-GST dated 3.8.2022 agreeing to do an act is nothing but a contractual agreement. In the said agreement there are two parties and where one party agrees to do something and the other party agrees to pay consideration to the first party for doing the said thing. In the instant case the applicant is agreeing to shift the transmission towers/ raise the height of the transmission lines/towers and for this purpose consideration is paid by the customer - the said services provide by the applicant would be aptly Hovered under the service of agreeing to do an act for a consideration and therefore such services would be classifiable under 999792. What shall be the time of supply? - HELD THAT - Since no specific contract details are available it is found that in general the time of supply shall be the time prescribed under Section 13 of the CGST Act 2017. What shall be the HSN/SAC Code and rate of GST for such supplies ? - HELD THAT - The service would be covered under the services of agreeing to do an act for a consideration and would be classifiable under Heading 999792 and chargeable to 18% GST. Whether ITC on the running bills received from the contractor can be claimed by MSETCL? If ITC can be claimed by MSETCL then whether ITC can be claimed in the period in which the running bill is received or on the receipt of the final invoice/completion of entire work? - HELD THAT - In the instant case for a generic question it is not possible to decide whether any structure is a plant and machinery without going into the facts and details in a particular case. Therefore it is not possible to come to a conclusion whether in the generic situation mentioned by the applicant the service provided by the sub-contractors to the applicant for construction of an immovable property can be covered under the definition of plant or machinery. Under the circumstances it would not be possible to give any decision as to whether the input tax credit would be available to the applicant. However on the basis of general understanding if the activity of construction is in respect of plant and machinery input tax credit would be available. If the activity of construction is in respect of any immovable property that does not satisfy the definition of plant and machinery laid down in the Explanation under Section 17 of the CGST Act 2017 no input tax credit would be available to the applicant. If input tax credit can be availed it will be on the basis of the running bills raised by the sub-contractors. What shall be the value of supply at a particular moment when consideration is received? - HELD THAT - The dedicated users of the electricity approach the applicant for supply of electricity and in order to provide uninterrupted and dedicated supply of electricity the applicant proposes that EHV Substations/lines have to be constructed and for the said construction a contract is entered into with the dedicated user who provides for the cost of construction of the substation in addition to 15% Supervision charges to the applicant. The applicant in turn enters into contract with sub-contractors who do the actual construction of the EHV Sub Station/EHV Lines under the supervision of the applicant. After completion of the Construction the EHV Sub Station/ EHV Line so created is capitalized in the books of the applicant as an asset. The services provided by the applicant of setting up of infrastructure for transmission of electricity are more akin to managing the construction of infrastructure for provision of supply of electricity by providing skills of engineering project management and supervision of the actual construction. Supply has been defined under the CGST Act under Section 7 as all forms of supply of goods or services or both such as sale transfer barter exchange license rental lease or disposal made or agreed to be made for a consideration by a person in the course of furtherance of business. In the instant case the applicant is providing a service to the customer for a consideration in the course of furtherance of their business. Therefore the activity of managing a project of setting up a substation on behalf of the customer for providing dedicated and uninterrupted supply of electricity would be a supply in terms of the CGST Act 2017. Conclusion - i) Shifting/Height raising of Transmission Towers/Lines belonging to MSETCL through a contractor on the request of the Dedicated Consumers such as railways National Highway Authority of India etc. on receipt of payment of consideration in the form of adjustable deposit constitutes supply. ii) Time of Supply shall be the time prescribed under Section 13 of the CGST Act 2017. iii) The service would be covered under the services of agreeing to do an act for a consideration and would be classifiable under Heading 999792 and chargeable to 18% GST. iv) Value of supply shall be the value determined under Section 15 of the CGST Act 2017. v) Construction of EHV Substations and EHV Lines for dedicated user of Dedicated Consumers by MSETCL through a contractor on the request of the end users on receipt of payment of consideration in the form of adjustable deposit constitutes supply.

Summary

ISSUES:

• Whether various works undertaken by the transmission utility for dedicated consumers constitute "supply" under GST law.
• If such works are "supply," determination of the time of supply.
• Classification of services under appropriate HSN/SAC codes and applicable GST rates.
• Admissibility and timing of Input Tax Credit (ITC) on running bills received from contractors.
• Valuation of supply at the time of receipt of consideration.
• GST implications and credit treatment in cases of excess deposit refund to consumers post completion of works.
• GST liability and time of supply on recovery of shortfall amounts from consumers after completion of works.
• Whether the transmission utility acts as a pure agent in recovering costs from consumers.
• Tax treatment of allotment of existing spare assets (e.g., feeder bays) to dedicated consumers for use over a specified period.

RULINGS / HOLDINGS:

• The works undertaken by the transmission utility for dedicated consumers, including shifting/height raising of transmission towers, construction of EHV substations and lines, and construction of new transmission bays, constitute "supply" under GST.
• Time of supply for all such works shall be determined as per Section 13 of the CGST Act, 2017, generally the earliest of invoice issuance or receipt of payment (including advance).
• Shifting/height raising services are classifiable under Heading 999792 (services of agreeing to do an act for a consideration) and taxable at 18% GST (9% CGST + 9% SGST).
• Construction and management services for EHV substations, lines, and transmission bays are not works contracts (due to no transfer of property in goods) but fall under Heading 998339 (project management/engineering services) and are taxable at 18% GST.
• Allotment of existing spare assets such as feeder bays to dedicated consumers for a specified duration constitutes renting of immovable property under Heading 997212, taxable at 18% GST.
• Input Tax Credit (ITC) on running bills from contractors depends on whether the construction relates to "plant and machinery" or "immovable property." ITC is not available for works relating to immovable property (other than plant and machinery) under Section 17(5)(d) of the CGST Act. Determination requires case-specific facts; hence no generic ruling on ITC admissibility or timing was given.
• Value of supply at the time of receipt of consideration shall be determined under Section 15 of the CGST Act, 2017.
• Refund of excess deposit to consumers post-completion of works requires issuance of credit notes under Section 34; credit cannot be claimed without compliance.
• Recovery of shortfall amounts from consumers post-completion requires issuance of debit notes or supplementary invoices under Section 34, and GST liability arises at the time of receipt of such consideration.
• The transmission utility does not qualify as a pure agent in these transactions under Rule 33 of the CGST Rules, 2017 because it retains title to goods/services, uses assets for its own interest, and bears responsibility for contract execution.

RATIONALE:

• The legal framework applied includes the Central Goods and Services Tax Act, 2017 (CGST Act), Maharashtra Goods and Services Tax Act, 2017 (MGST Act), relevant notifications (notably Notification No. 12/2017-Central Tax (Rate) and its amendment Notification No. 8/2024), and CGST Rules, 2017.
• Exemption notifications were interpreted narrowly: transmission of electricity and minor ancillary services (e.g., metering, testing) are exempt, but major infrastructural construction and shifting works are taxable supplies.
• The Court applied the principle of ejusdem generis to limit exemption to services "incidental or ancillary" to electricity transmission, excluding major construction activities which are core business functions.
• Section 7 of CGST Act defines "supply" broadly to include all forms of supply for consideration in the course of business, supporting classification of the applicant's activities as supply.
• Input Tax Credit provisions under Sections 16 and 17 were analyzed, with particular focus on Section 17(5)(d) restricting ITC for construction of immovable property except plant and machinery, and the definition of plant and machinery under Section 17 explanation.
• Rule 33 of CGST Rules was examined to assess "pure agent" status, with the utility failing to meet conditions such as non-retention of title and non-use of goods/services for own interest.
• Valuation and time of supply rules under Sections 12, 13, and 15 of the CGST Act were applied to determine timing and value of taxable events.
• Procedural compliance for issuance of credit and debit notes under Section 34 was emphasized for adjustments in GST liability on post-completion deposit variations.
• No dissent or doctrinal shift was noted; the ruling followed established GST principles and recent amendments to exemption notifications.