Electricity supplied through grid supply is goods and exempt – AAR

Supply of electricity, utilities by lessor – are these separate supplies or composite supplies? Is GST applicable on supply of electricity by lessor to lessee? AAR – Haryana

An Interesting Ruling

Facts of the case:

• Applicant has taken a premise on lease;
• A separate agreement entered where, lessor shall also provide electricity and other utilities such as common area, parking lot maintenance, pest control, etc.;
• The electricity shall be supplied through GRID (on the basis of reading of meters installed for lessee’s consumption) and captive DG sets both;

Matters on which ruling were sought:

• Whether the supply of electricity is a supply of goods or services?
• Whether the supply of electricity and supply of utilities/leasing are separate supplies or composite supplies?
• If supply of electricity and supply of utilities/leasing are separate supplies, what is the classification of supply of electricity for the purpose of payment of GST?

Findings and Rulings:

• Electricity supplied through GRID is Goods, which has been even clarified by various honorable authorities; however, if supplied through DG sets, it will be considered to be services.
• The supply of electricity through GRID is not a taxable supply and even electricity and utilities are not naturally bundled together nor are supplied in conjunction with each other. Hence, these are not composite supplies.
• Supply of electricity through GRID is goods, thus, no GST shall be levied, and on other hand, if supplied through DG sets is a service and GST shall be levied @ 18%.

Source: [2020] 113 taxmann.com 324 (AAR – HARYANA)