Centre plans to bring electricity under GST

It is learnt that most of the States opposed the move in a meeting held to elicit their views recently. The States fear that they might lose out on receivable electricity duties if it was brought under the GST.

Hyderabad: The union Government is reportedly making efforts to bring electricity within the goods and services tax (GST) framework. The Centre is planning to introduce GST in place of Electricity Duty (ED) collected by the State Governments and trying to get a share of it. Electricity is one of several commodities like petrol, diesel and natural gas that have so far remained out of the purview of GST.

It is learnt that most of the States opposed the move in a meeting held to elicit their views recently. The States fear that they might lose out on receivable electricity duties if it was brought under the GST.

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The Power Ministry is reportedly looking at its likely impact on the industry, States’ revenue and household electricity bills. It is learnt that Audit and consulting firm Deloitte, which was appointed to analyze the impact of the move, submitted a report to the Power Ministry that showed the move would benefit industry by lowering its outgo in levies.

According to State Energy Department officials, the move was expected to benefit coal-based power plants as they would be able to use the credit for the taxes paid on various inputs and services they procure, to meet their final GST. The GST could potentially drive down electricity costs for businesses due to the possibility of claiming their input tax credits, the officials added.

At present, power utilities pay GST on various capital goods and raw materials they purchase, which get built into the price of the electricity they sell, rather than GST being collected separately from power buyers in the form of a tax that is passed on to the ultimate consumer.

Supply of electricity is exempted under GST as per the Notification 02/2017 (Central Tax). Further, services provided by an electricity transmission or distribution utility (state electricity board) by way of transmission or distribution of electricity is exempted under GST as per the Notification 12/2017 under heading 9969. Accordingly, if any person other than electricity transmission or distribution utility supplies electricity, it will attract GST at the rate of 18 percent..

Before GST, electricity supply was exempted under the respective State’s VAT Acts. Also, services provided by an electricity transmission or distribution utility by transmission or distribution of electricity were exempted under the Service Tax Act.