The Andhra Pradesh High Court (Amaravati Bench) has clarified that the supply of electricity between the petitioner and Power Trading Corporation India Ltd. (PTC), for onward supply to Bangladesh Board, which happened in India itself, can only be called a ‘supply for export of goods’ and not, per se, an ‘export of goods’.
As the supply of electricity, by the petitioner, to PTC is not an ‘export of supply of goods’ and is a supply within India, the Court directed the petitioner, to resubmit it’s applications for refund of ITC, relating to the supply made by the petitioner to the Bangladesh Board directly, by treating the supply of electricity to PTC, as domestic supply of electricity, in the formula set out in Rule 89 of the CGST Rules.
The Division Bench comprising Justice R Raghunandan Rao and Justice Subhendu Samanta observed that the PTC had entered into a contract with the Bangladesh Board to supply electricity, and that agreement specifically mentioned that the electricity would be sourced from the petitioner, for which a separate agreement was executed between PTC and the petitioner.
Under the agreement between PTC and the petitioner, the Bench found that the electricity would be loaded into the Grid at the interconnection point, in Andhra Pradesh, to be wheeled to the Delivery point, which is the Bohronpur sub-station, in West Bengal. Thus, the electricity would stand transferred from the petitioner to PTC and from PTC to the Bangladesh Board.
The Bench noted that in both the agreements, Bohronpur sub-station, in India, is specified as the delivery point, which would be the place of supply, which would mean that the supply of electricity happened in India itself.
The Bench explained that even though the supply of electricity, by PTC to the Bangladesh Board, is an export supply of goods, as the supply moves the electricity out of India, the supply of electricity, by the petitioner to PTC, is a separate supply, and therefore, refused to accept the contention that this supply is so integral to the export supply that it should be treated as a part of the export supply.
The supply of electricity, between the petitioner and PTC, can only be called a supply for export of goods and not, per se, an export of goods, as the petitioner, though mentioned in the agreement, is not a party to the contract of supply of electricity, by PTC to the Bangladesh Board, added the Bench.
Briefly, the petitioner, involved in the generation and supply of electricity to its purchasers, had sought a refund of the Input Tax credit (ITC) which accrued on account of the purchase of goods and services from various third parties, in the course of generation of electricity. The refund was sought on the ground that the supply of electricity made by them to the Bangladesh Board directly as well as the supply made by them to the Bangladesh Board through Power Trading Corporation India Ltd. (PTC) would be an export supply, which are zero rates supplies under the provisions of s.16 of the IGST Act, 2017.
The applications for refund of ITC were, however, rejected by the lower authorities inter alia on the ground that the value of turnover pertaining to supplies made to PTC is to be excluded from the adjusted total turnover, as the electricity to PTC was domestically supplied electricity, and the amounts received as reimbursement towards charges of electricity are to be excluded in the zero-rated turnover.
Appearances:
Advocates Raghavan Ramabhadran and Lakshmi Kumaran Sridharan, for the Petitioner/ Taxpayer
Advocate Y N Vivekananda, for the Respondent
