Introduction
In recent years, electric vehicles (EVs) have gained significant attention as a sustainable and eco-friendly mode of transportation. As the adoption of EVs continues to grow, the establishment of public charging stations has become crucial to support the charging infrastructure for these vehicles. One of the key aspects that needs clarity is how the charging services provided by these stations are treated under the Goods and Services Tax (GST) framework in India. In a recent case, M/s. Chamundeswari Electricity Supply Corporation Ltd. sought an advance ruling from the authorities to determine the GST implications of their electric vehicle charging services. The ruling provides valuable insights into the classification and taxation of such services.
Background
M/s. Chamundeswari Electricity Supply Corporation Ltd., based in Karnataka, operates as a distributor of electricity and is engaged in the sale of energy. The company is looking to establish public charging stations for electric vehicles, both two-wheelers and four-wheelers. These stations will provide charging services to EV users, involving two key components: energy charges (based on the units of energy consumed) and service charges (associated with setting up and operating the charging stations).
Key Questions Raised
The company filed an application for an advance ruling to clarify the following questions:
Classification of Activity: Is the activity of charging electric vehicle batteries considered as the "supply of electrical energy" (supply of goods) and "service charges" (supply of service)?
Treatment of Components: Should both the "supply of electrical energy" and "service charges" be treated as the "supply of service," in line with the Ministry of Power's clarification dated 13-04-2018?
Applicability of Exemptions: If the components are considered as separate supplies, is the "supply of electrical energy" exempt under Notification No. 2/2017-Central Tax (Rate) and are "service charges" taxable under Notification No. 11/2017-Central Tax (Rate)?
Rate of Tax and SAC: If both components are treated as "supply of service," what is the applicable Service Accounting Code (SAC) and GST rate?
Input Tax Credit: Can the GST collected on output tax be set off against input tax paid by the corporation on inputs and input services, as per Rule 42 and 43 of the GST Rules?
Advance Ruling and Analysis
The advance ruling authority conducted a thorough analysis of the questions raised by M/s. Chamundeswari Electricity Supply Corporation Ltd. Here are the key findings:
Classification of Activity: The ruling authority concluded that the activity of charging electric vehicle batteries involves providing a service to the consumer, which is the charging of batteries in electric vehicles. This service does not qualify as a supply of electricity or any movable property. Instead, it is considered a service where electrical energy is consumed for the purpose of converting it into chemical energy stored in the battery.
Treatment of Components: The Ministry of Power's clarification dated 13-04-2018 established that the activity of charging EV batteries involves a service that consumes electricity, without involving the sale of electricity. Therefore, both the "supply of electrical energy" and "service charges" are treated as components of the "supply of service."
Exemptions and Applicability: Since the activity is classified as a "supply of service," the exemptions related to the "supply of electrical energy" under Notification No. 2/2017-Central Tax (Rate) and the taxability of "service charges" under Notification No. 11/2017-Central Tax (Rate) are not applicable.
Rate of Tax and SAC: The activity of charging batteries for electric vehicles falls under the SAC 998714, which covers maintenance and repair services of transport machinery and equipment. The applicable GST rate is 18%, divided equally between CGST and KGST, in accordance with entry No. 25(ii) of Notification No. 11/2017-Central Tax (Rate).
Input Tax Credit: The GST collected on output tax can be offset against the input tax credit received by the corporation on its inputs and input services, following the provisions of Sections 16 & 17 of the CGST Act 2017 and Rules 42 and 43 of the CGST Rules 2017.
Conclusion
The advance ruling clarifies the GST implications of electric vehicle charging services, establishing that these services are treated as the "supply of service" and are subject to an 18% GST rate. This ruling provides a framework for businesses and consumers to understand the tax implications associated with the growing electric vehicle charging ecosystem. As the adoption of EVs continues to accelerate, such clarifications are essential for fostering a favorable environment for sustainable transportation and infrastructure development. Electric vehicle charging services levy 18% GST.
Topic-Chamundeswari Elecricity Supply Corporation Limited
Court-KARNATAKA-AAR
Date-13/07/2023
Team Taxonation
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