GST Updates

Embargo over Taxability of Renting of Metering Equipment-Electricity Distribution Companies –Uncertain Times for Tax Payers

The Embargo over taxation of services provided by Electricity Distribution Companies continues. Varied Judgments, circulars issued by under Service Tax Regime and GST Regime alongwith AAR Decision presents a very blurred picture.


  1. Scenario in GST Regime:


  • Exemption Entry: Notification No. 12/2017 dated 28th June 2017 exempts vide Entry No. 25 “Transmission or distribution of electricity by an electricity transmission or distribution utility.”


  • Circular: Circular No. 34/8/2018 dated 1st March 2018 provided that for all services such as application fee for releasing connection of electricity, rental charges against metering equipment, testing fee for meters, transformers, capacitors, etc, labour charges from customers for shifting of meters or shifting of service lines and charges for duplicate bill, such exemption would not apply and such services are taxable.


  • AAR Judgement: AAR Rajasthan in the matter of M/s Tp Ajmer Distribution Limited Florence (AAR Rajasthan) [2018] 95 61 (AAR- RAJASTHAN) also held that services of renting of metering equipment would be liable to tax under GST Regime relying upon the Circular issued on 1st March 2018.


  1. Scenario in Service Tax Regime:


  • Exemption Entry: Under the Service Tax Regime vide Notification No 11/210-Service Tax, taxable service provided to any person, by any other person for transmission of electricity, from the whole of service tax leviable thereon under section 66 of the said Finance Act was exempted from levy of Service Tax.


  • Circular: Vide Circular No. 131/13/2010 dated 7th December 2010, which provided that it is a general practice among electricity  transmission(TRANSCO) / distribution companies (DISCOM) to install electricity meters at premises of consumers, to measure amount of electricity consumed by them  and  ‘hire charges’ are collected periodically.  Supply of electricity meters for hire to the consumers being an essential activity having direct and close nexus with  transmission and distribution of electricity, the same is covered by the exemption for transmission and distribution of electricity, extended under the relevant notifications.


  1. Writ Challenging Circular No. 34/8/2018 Dated 1st March 2018-GST Regime


A writ petition was filed in Gujarat High Court in the matter of Torrent Power Ltd. v. Union of India [2018] 93 428 (Gujarat) challenging validity of circular issued on dated 1st March 2018 and change of view of the Government and argued that the circular can only be applied prospectively and not retrospectively. Gujarat High Court issued notice to the Respondent.


Comment: These are uncertain times wherein earlier settled principles are being overturned without any reference, multiple judgments are being given on similar issues, circular have been issued without any reference to the previous ones and changing the earlier stand. It’s really tough to be a tax payer in present times because being a Government, there is always an option of issuing a circular citing “in the interest of public” but for being a taxpayer there is no option but to deposit tax, interest, penalty and face the music.

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