02.09.2023: ITC not available on inputs and input services used in undertaking ‘consumer funded jobs’ for distribution of electricity: Delhi AAR

The Delhi Authority for Advance Rulings in the case of M/s Tata Power Delhi Distribution Limited vide Order No. OI/DAAR/2023 dated 11.07.2023, held that  Input Tax Credit would not be available on inward supply of goods or services used for undertaking consumer funded jobs, i.e.  outward supply of services of electricity distribution to consumers. 

In this case, the Applicant is engaged in providing various ‘Consumer Funded Jobs' such as creating new connections for supply of electricity, load enhancement/augmentation, electrification of un-electrified area, pole shifting, conversion of overhead lines into underground cables etc. at the specific request of its customers. However, the principal business of the Applicant is transmission and distribution of electricity. 

The advance rulings has been sought on the issue whether the ITC is available on the consumer funded jobs done by them.

The applicant submitted that in order to discharge main responsibility of distribution of power to the consumers it is essential for the applicant to have a network of transformers connected by electrical wires, sub-stations, electricity meters and other equipment. The applicant admitted that the inputs such as cables, sub-stations etc. are inputs for its principal supply “Electricity Transmission and Distributions” and has no connection with the supply of services such as New Electricity Connections, Load enhancement etc.

The DAAR held that inputs against which applicant has sought to avail ITC are not part of outward supply classified by applicant under HSN 9986 “Support Services to Electricity Transmission and Distribution”. Inputs used for creating infrastructure for electricity transmission cannot be held to be used in business of taxable supplies. Hence, ITC for input, input services and capital goods is not available to applicant in undertaking “consumer funded jobs “

The DAAR also relied upon the ruling of Uttar Pradesh Authority for Advance ruling on the similar issue in the case of Uttar Pradesh Power Transmission Corporation Ltd. vide order No. 37 dated 05.08.2019, where it was held that the applicant is not eligible to claim Input Tax credit in respect of creating infrastructure for electricity transmission.

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