In Advance Ruling No. 01/DAAR/2023 -AAR- Tata Power Delhi Distribution Limited not eligible for ITC in ‘Consumer-Funded Jobs’: AAR (Delhi)
Members Anup Kumar (Central Tax) & Lekh Raj (State Tax) [11-07-2023]

Read Order: In Re: Tata Power Delhi Distribution Limited

Chahat Varma

New Delhi, July 21, 2023: The Delhi Authority for Advance Rulings has ruled that Tata Power Delhi Distribution Limited (applicant) was not eligible to claim input tax credit (ITC) for input and input services in ‘consumer-funded jobs’, as well as for capital goods used in creating infrastructure for electricity distribution.

The applicant, primarily engaged in the transmission and distribution of electricity, had sought an advance ruling on whether they were eligible for ITC for capital goods, input, and input services in their ‘consumer-funded jobs’ related to creating infrastructure for electricity distribution. These consumer-funded jobs included activities such as creating new connections, load enhancement, electrification of un-electrified areas, pole shifting, and converting overhead lines into underground cables.

The two-member bench of Anup Kumar (Central Tax) and Lekh Raj (State Tax) referred to Circular No. 34I8/2018-GST dated 01.03.2018 issued by the Central Board of Indirect Taxes and Customs, which clarified that the activities carried out by DISCOMS in relation to the recovery of charges from consumers under the State Electricity Act were exempt from GST. However, other services provided by DISCOMS, such as application fees, rental charges, testing fees, labour charges, and charges for duplicate bills, were taxable. The bench further noted that any assets created by the applicant for performing the consumer-funded jobs were owned by the applicant itself. Therefore, it can be inferred that the inputs for which the applicant sought to claim ITC were not part of the outward supply classified by the applicant under HSN 9986 ‘Support Services to Electricity Transmission and Distribution’.

The bench also noted that for the applicant to fulfil its primary responsibility of distributing power to consumers, it required a network of transformers, electrical wires, substations, electricity meters, and other equipment. The applicant had acknowledged that inputs such as cables and substations were used for its principal supply, which was ‘Electricity Transmission and Distribution’, and not for services like new electricity connections or load enhancement. The bench observed that the list of services mentioned were additional services provided by the applicant, separate from the principal supply of electricity transmission and distribution. The inputs used for creating infrastructure for electricity transmission, such as cables and substations, cannot be considered as being used for taxable supplies. Additionally, the immovable property created by the applicant did not fall under the category of ‘plant and machinery’, thereby making the applicant ineligible to claim input tax credit for these inputs.