Order Date – 06 November 2024

Facts –

• The Applicant, Chamundeswari Electricity Supply Corporation Limited,  entered into Power Supply Agreements to supply power to their Industrial customers. Accordingly, the appellant enters into back- to-back Power Purchase Agreements with private and state-owned energy generators to purchase power. 
• This led to a situation where the appellant is saddled with the stranded cost. The Government enacted provisions through Act and Policies empowering the appellant to collect Additional Surcharge from all such Customers. 

Issue –

• Whether additional surcharge collected from Open Access Consumer is taxable?

Order –

• The AAAR observed that the collection of Additional Surcharge is not towards any independent activity but is incidental levy to the main activity of Supply and distribution of electricity for which they have entered into Power Supply Agreements with their customers. The Additional Surcharge is collected to compensate the “Fixed Charges” which is stranded in the hands of the Appellant. This additional surcharge is a part of “Tariff’ fixed by KERC and levied as per various provisions enacted by Central and State Governments.
• Additional Surcharge levied under Electricity Act from their customers who opted for sourcing electricity from open access, over and above the consideration charged towards supply and distribution of electricity should form part of taxable value, determined in terms of Section 15 of the CGST Act, 2017.
• Further, the supply of electricity as goods and/or distribution of electricity as service are covered under exemption either in terms of entry No. 104 of Notification No.02/2017 CT(R) dated 28.06.2017 applicable to goods and /or entry No.25 of the Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 applicable to services.