18% GST Payable On Service of Charging Of Battery Of Electrical Vehicle: AAR

The Karnataka Authority of Advance Ruling (AAR) has ruled that 18% GST is applicable on the service of charging the battery of an electrical vehicle.

The bench of M.P. Ravi Prasad and Kriran Reddy T. has observed that the Electrical Vehicle contains a motor to rotate the wheels that functions out of the energy sourced through the battery, and thus the said vehicle qualifies to be a motor car. Thus, charging the batteries of electric vehicles amounts to charging the batteries of motor cars, and thus the activity squarely gets covered under SAC 998714.

The Applicant is planning to set up various public charging stations (PCS) on its own for charging electric vehicles (EVs), both two-wheelers and four-wheelers. The charging of a battery in an EV requires electricity. The Applicant will provide electric energy to these public charging stations. All electric vehicle users can access the public charging stations for battery charging.

The applicant would issue tax invoices and collect the "Electric Vehicle Charging Fee". It includes two components: energy charges and service Charges. ‘Energy Charge’ refers to the number of units of energy consumed, and Service Charge’ refers to the services provided by the charging station, i.e., the cost of setting up the service station and running it.

The applicant sought an advance ruling on the issue of whether the ‘supply of electrical energy’ and ‘service charges—both components—should be treated as ‘supply of service’ as held by the Ministry of Power.

The AAR held that the charging of electric batteries is an activity amounting to a supply service, i.e., a battery Charging Service for motors. The ‘supply of electrical energy’ and ‘service charges’ together are to be treated as a ‘supply of service’.

The AAR noted that the ‘supply of electrical energy’ and ‘service charges’ are not treated as two different components. The activity of the applicant, i.e., charging the battery of an electrical vehicle, is treated as a supply of service that gets covered under SAC 998714 and attracts 18% GST. The GST collected, which is treated as output tax, can be set off against the input tax credit received by the applicant on its inputs and input services in terms of Sections 16, 86, and 17 of the CGST Act 2017 read with Rules 42 and 43 of the CGST Rules 2017.

Applicant’s Name: Chamundeshwari Electricity Supply Corporation Limited

Date: 13/07/2023

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