Central Goods and Services Tax Act, 2017 – Validity of Circular No.34/8/2018-GST -
Taxability of charges recovered for the activities directly connected with the distribution and transmission of electricity such as application fee, meter rent, testing fee, labour charges for shifting meters and shifting of service line, etc. - Section 2(90) - principal supply.
HELD - the meaning of “transmission and distribution of electricity” does not
change either for the negative list regime or the GST regime. If that be so, the services
which stood included within the ambit of transmission and distribution of electricity during
the pre-negative list regime cannot now be sought be excluded by merely issuing a
clarificatory circular, that too, with retrospective effect - from the very manner in which
the Department have treated the services related to transmission and distribution of electricity during the pre-negative list regime, such services would stand covered by the
exemption granted to transmission and distribution of electricity by virtue of inclusion of
such services in the list of negative services under section 66D (k) of the Finance Act as
well as by virtue of exemption notification issued under the CGST Act -
where the services are naturally bundled in the ordinary course of business and the single service which gives such bundle its essential character is exempt from tax, the entire bundle will have to be treated as provision of such single service - charges such an application fee, meter rent, testing fee, etc collected by the Petitioners are part of composite supply of which principal supply is the actual supply of electricity and therefore the entire composite supply is exempt from tax under Entry 25 of Notification No.12/2017 dated 28.6.2017 - the Paragraph 4(1) of the impugned circular No.34/8/2018-GST dated 1.3.2018 is hereby struck down as being ultra vires the provisions of section 8 of the CGST Act, 2017 as well as Notification No.12/2017- CT (R ) serial No.25 - the respondents shall drop the proceedings under the Finance Act, 1994 as well as under the CGST/SGST Acts sought to be initiated by virtue of the impugned summons to the extent the same is based upon item No.4 (1) of the impugned circular dated 1st March, 2018 – the writ petition is allowed.