TMI Blog2024 (3) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... ingle service. Further it is seen that the charges are on the basis of the energy input to the system. Hence the wheeling/network charges collected is for the service of transmission of electricity and hence covered under the exemption stated in the notification - there are force in the Applicant's contention regarding charges collected for dishonoured cheque and belated payment. Based on the Board's Circular No. 178/10/2022-GST dated 03.08.2022, the charges collected for dishonoured cheque are not taxable and charges collected for belated payments are naturally bundled with the main supply, i.e. transmission of electricity, which is exempted and thereby these charges are also exempted. The following charges collected for the services rendered by the Applicant are directly or closely related to transmission or distribution of electricity and therefore we hold that these charges will be completely exempted as per Notification No. 12/2017-CT(Rate) dated 28.06.2017: Belated payment surcharge (BPSC), Dishonoured cheque service charge and Network/wheeling charges - the Applicant is bringing the entire gamut of services under composite supply. As per GST law, whether a supply con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruling have changed. 4. In terms of Section 104 of the Act, where the Authority finds that advance ruling pronounced by it under sub-section (4) of Section 98 or under sub-section (1) of section 101 has been obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the applicant as if such ruling had never been made. 5. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. M/s Tamil Nadu Generation. Distribution Corporation Limited, 144, Anna Salai, Chennai 600002 (hereinafter called as the Applicant ) are registered under the GST Acts with GSTIN: 33AADCT4784E1ZC. 2.1 The Applicant submitted a copy of challan evidencing pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Regulatory Commission (Grid interactive Solar PV Energy Generating Systems) (GISS) Regulations, 2021 have been notified Regulation 4(i-a) Charges recoverable by tire licensee in the Tamil Nadu Electricity Supply Code 2004 (Notification No. TNERC/SC/7/1 Dated 21-07-2004 as amended- (i-a) The Wheeling charges/Network charges shall be payable by the HT/LT consumer category in accordance with the rates as the Commission may fix time to time for different category of consumers (to recover the cost incurred by the Licensee for its distribution wire business). Provided that the wheeling charges/Network charges may be denominated in terms of RS/kWh or Rs/kVAh or Rs/kW/month or Rs/kVA/month for the purpose of recovery from the Distribution network user or any such denomination as my be stipulated by the Commission. The Explanatory statement under the amendment notification dated 28.05.2021 states- 3. Therefore it is proposed that the Distribution network cost arrived by the Commission shall have to be recovered under separate head i.e. 'wheeling charges/network charges. Such charges is applicable to all LT HT category consumers at the rate fixed by the Commission time to time towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricity shall be fixed under sub-section (2) of section 45; . Section 181 enables the Commission to make regulations consistent with this Act and the rules generally to carry out the provisions of this Act. From the above, it is expressly clear in so many words that network / wheeling charges, surcharge, and additional surcharge are charges for distribution of electricity. The Applicant, however, out of abundant caution, is charging GST on few miscellaneous charges relating to HT consumers like cross subsidy surcharge, wheeling charges, etc. In respect of LT services, GST is levied on few miscellaneous charges from August 2021. On the above analysis of the provisions and the nature and character of the network / wheeling charges, cross subsidy surcharge, and additional surcharge, are charges for distribution of electricity by the applicant-distribution licensee. They have been levying GST on application fee, meter rent, testing fee and labour charges for shifting of meter and service lines for HT and LT consumers from July 2017; From billing month of Oct 2020 onwards, they are levying GST on miscellaneous charges relating to HT consumers like harmonic compensation charges, excess de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch units, he shall be liable to pay compensation at such rates as the Commission may declare from time to time. (5) Capacitor Compensation charge In the case of existing LT service connections (which are not coming under the purview of power factor incentive/disincentive scheme)] with connected load of motors of 3 HP and above or for using welding transformers (irrespective of their rating), the consumer shall install adequate capacitors within a period of two months from the date of issue of notice issued by the licensee in this connection and shall be Hable to pay a compensation charge of ten percent of the price of electricity supplied to him for the preceding four months of consumption till such time adequate capacitors are installed; and where inadequate capacitors are installed or where some of the capacitors are defective, the ten percent shall be reckoned proportionate to the extent of inadequacy or defect, as the case may be. (6) Estimate charges for additional load or reduction in load Chapter 7 of the TN Electricity Distribution Code 45(1) (ii) Extension, improvement or alteration to service lines to meet any additional demand will be charged on the same basis. In each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service charge The Licensee shall collect service charges as specified by the Commission from time from the consumer, when a cheque given by consumer is returned by the Bank for any reason whatsoever. (14) Charges for restoration of cheque payment facility The Licensee shall collect service charges as specified by the Commission from time from the consumer, when a cheque given by consumer is returned by the Bank for any reason whatsoever. (15) Excess demand charge and excess energy charge during restriction and control of supply The maximum demand charges for HT supply shall be based on the actual recorded demand at the point of supply or at 90% of the demand quota as fixed from time to time through restriction and control measures whichever is higher. In case the maximum recorded demand is in excess of the quota fixed shall be charged at rates specified by the Commission. The energy consumption over and above the energy quota fixed shall be charged at the rate specified by the Commission in respect of such class of consumers upon whom the restriction and control measures apply. The services which draw electricity from TNEB Grid for using welding sets during the restricted hours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electric line, material or meter is cut or removed or taken away by whomsoever or if they store, or possess or carry away without the consent of the licensee/owner, shall be punishable with imprisonment and/or with a fine. Further amendment to the Electricity Supply Code, in regulation 5, the sub-regulation 12 read as (h) Application for repair or replacement of licensee's properties damaged due to dashing of vehicles etc., by the third parties chargeable under Deposit Contribution Works basis. (20) Changing meter at the request of the consumer This is a Meter related charged and as provided under Regulation 5(11) of the Supply Code, the Licensee is authorized to collect charges for its Meter related works carried out for the consumers. (21) Inspection charges This is a Meter related charged and as provided under Regulation 5(11) of the Supply-Code, the Licensee is authorized to collect charges for its Meter related works carried out for the consumers. (22) Levy of charges for reduction in demand Chapter 7 of the TN Electricity Distribution Code 45(1) (ii) Extension, improvement or alteration to service lines to meet any additional demand will be charged on the same basis. In e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges which are charges for distribution of electricity charged by the applicant as determined by the Commission, advance ruling is sought on the liability to the levy of GST on the above-cited charges. The write-up on the said charges is as follows (30) Wheeling Charges Wheeling charges payable to Distribution Licensee, by an open access customer shall be determined by the Commission. Where a dedicated distribution system used for open access has been constructed for exclusive use of an open access customer, the wheeling charges for such dedicated system shall be worked out by the Licensee and got approved by the Commission and shall be borne entirely by such open access customer till such time the surplus capacity is allotted and used by other persons or for other purposes. In case intra-state transmission system or distribution system is used by an open access customer in addition to inter-state transmission system, transmission charges and wheeling charges as fixed and approved by the Commission shall be payable for use of intra-state system in addition to payment of transmission charges for inter-state transmission. In regulation 68, under sub-regulation 3, it is stated that & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board circular 178/10/2022-GST dated 03 August 2022 refers in this regard. The circular pertinently states that the minimum fixed charges/capacity charges and the variable/energy charges are charged for sale of electricity and are thus not taxable as electricity is exempt from GST. The above charges, as detailed above are charges for the supply of electricity and are exempt from GST. Dishonored cheque service charge does not attract GST in the light of paragraph 7.3 in the said circular dated 03 August 2022. Belated payment surcharge does not attract GST in the light of paragraph 9 in the said circular dated 03 August 2022. While discussing the late payment surcharge fee , paragraph 9 in the above cited circular states that Even if this service is described as a service of tolerating the act of late payment, it is an ancillary supply naturally bundled and supplied in conjunction with the principal supply, and therefore should be assessed as the principal supply. Similarly in paragraph 7.1.6 in the said circular, Board has explained that Such amounts paid for acceptance of late payment, early termination of lease or for pre-payment of loan or the amounts forfeited on cancellation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city charges, disconnection of supply of electricity for non-payment thereof, restoration of supply of electricity; measures for preventing tampering, distress or damage to electrical plant, or electrical line or meter, entry of distribution licensee or any person acting on his behalf for disconnecting supply and removing the meter; entry for replacing, altering or maintaining electric lines or electrical plants or meter and such other matters. Accordingly, the Commission has specified the Electricity Supply Code in which all the above charges recoverable by the licensee are specified. Distribution of electricity is necessarily a bundle of activities and cannot be a single activity of distribution simpliciter. All the above charges are, therefore, ancillary to the principal supply of electricity naturally bundled and supplied in conjunction with each other in the ordinary course of business and are to be treated as tire principal supply for determining the tax liability. 3.1 The State jurisdictional Officer vide his letter dated 26.06.2023, has submitted that,- TANGEDCO is responsible for transmission and distribution of electricity as distribution licensee in terms of section 14 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s distribution system and associated facilities by another person for conveyance of electricity on payment of charges determined under Section 62. They invite attention to paras 7.1.6, 9 10 in Board's Circular No. 178/10/2022-GST dated 03.08.2022. They relied on the ruling of AAR, Karnataka in the case of Chamundeswari Electricity Supply Corporation Limited , wherein it was held that wheeling charges are exempt from the levy of GST. They also relied on decision of the Hon'ble High Court of Rajasthan in the case of Jodhpur Vidyut Vitran Nigam Ltd Vs UOI and concurred with the law held by the Hon ble High Court of Gujarat in the case of Torrent Power Ltd. Vs UOI. 4.2 The Applicant was asked to submit a write-up about all the activities listed in the application for which they charge the consumers. Meanwhile, the State Member for Advance Ruling Authority was changed and hence one more personal hearing was given to the Applicant on 14.11.2023. Shri V Ravindran, Advocate, who is the Authorized Representative of the Applicant appeared for the hearing and reiterated the submissions made in their application as well as in the previous hearing. The AR also submitted a copy of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r entity entrusted with such function by the Central Government or, as the case may be, the State Government.' From the submissions made by the Applicant, we find that TANGEDCO, the Applicant, is a distribution licensee in terms of section 14 read with section 131 of the Electricity Act, 2003 and they are authorized to operate and maintain distribution system for supplying electricity to the consumers. Thus they are undoubtedly 'Electricity transmission or distribution utility' and the transmission or distribution of electricity services provided by them is exempt from GST as per the Notification No. 12/2017-CT(Rate) dated 28.06.2017, 5.5.1. As per their submissions, the Applicant, in the course of providing service for distribution of electricity, also provide other services for which they collect charges as detailed in para 2.2 above. These charges collected by the Applicant are before us to decide their taxability. We first take up 'wheeling/network charges'. It was stated by the Applicant that as per section 2(76), wheeling means the operation whereby the distribution system and associated facilities of a transmission licensee or distribution licensee, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The price charged for electricity by the power generating companies from the State Electricity Boards (SEBs)/ DISCOMS or by SEBs/DISCOMs from individual customers has two components, namely, a minimum fixed charge (or capacity charge) and variable per unit charge. 10.2 Both the components of the price, the minimum fixed charges/capacity charges and the variable/ energy charges are charged for sale of electricity and are thus not taxable as electricity is exempt from GST. We find force in the Applicant's contention regarding charges collected for dishonoured cheque and belated payment. Based on the circular cited, the charges collected for dishonoured cheque are not taxable and charges collected for belated payments are naturally bundled with the main supply, i.e. transmission of electricity, which is exempted and thereby these charges are also exempted. 5.5.3. Based on the discussions held in the above paras, we are of the considered opinion that the following charges collected for the services rendered by the Applicant are directly or closely related to transmission or distribution of electricity and therefore we hold that these charges will be completely exempted as per Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le based on the Board's circular cited supra:- (1) Application fee (2) Meter rent (3) Testing fee (9) Service/line structures and equipment shifting charge We are of the considered opinion that the following charges collected for the services rendered by the Applicant are only ancillary services, akin to the one included in the exclusion clause of para 4 of the Board's No. 34/8/2018-GST dated 01.03.2018 and thereby taxable:- (11) Reconnection charge (16) Labour charges for shifting meters or shifting of service lines (18) Charges for providing CMRI data (23) changing/shifting of meter board/LTCT box/HT box due to damage or for accommodating additional safety features (26) Charges for furnishing certified copies of documents to consumer (29) Dismantling charge. 5.6.2. We find that the Applicant has also argued that the charges stated by them are for those supplies which are ancillary supplies naturally bundled and supplied in conjunction with the principal supply of electricity supply as per the Code notified by the Commission under the Electricity Act, and therefore should be assessed as the principal supply, namely, distribution of electricity and supply of electrical ener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Estimate charges for Additional load or reduction in load (7) Excess contracted load charges (10) Name transfer charge (12) Consumer Meter card replacement charge (14) Charges for restoration of cheque payment facility (15) Excess demand charge and excess energy charge during Restriction and control of supply (17) Excess demand and Excess energy charges (19) Recoveries from consumers for damage of Board properties (20) Changing meter at the request of the consumer (21) Inspection charges (24) Replacement of burnt/damaged meter (25) Temporary disconnection at the request of the consumer (27) Additional surcharge (28) Tariff change (31) Cross subsidy surcharge We find that the above services are not naturally bundled with the principal supply i.e. transmission/distribution of electricity. The main supply may take place without above ancillary charges. The provision of service such as consumer meter card replacement charge, excess contracted load charges, Temporary disconnection charges at the request of the consumer etc. are infrequent, need based and provided upon specific request of the consumer at a cost which is independent of the cost for service of the main supply. The main s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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