Service Tax On Water And Electricity Supply To Tenants: Conclusive & Exemplary Ruling by CESTAT Dt.11.10.23

No Service Tax on Water and Electricity Supply to Tenants:

In a recent ruling by the Hyderabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), it was ruled against applicability of service tax on water and electricity supply to tenants to concessionaires or tenants.

The bench, comprising Anil Choudhary (Judicial Member) and A.K. Jyotishi (Technical Member), stated that supplying water and electricity is essentially a sale of goods and therefore does not fall under the provisions of ST.

The case involved an appellant who had agreements with various concessionaires, granting them the right to use specific locations primarily for their business within the airport. The concessionaires were charged for the usage of space as well as for the supply of electricity and water, along with a 10% markup, for the period October 2008 to June 2010.

On June 22, 2010, the government issued a notification granting exemption for various services provided within ports or airports, including the supply of water and electricity.

However, during an audit, the department raised concerns regarding the taxable categorization of the amount recovered under “Management, Maintenance, and Repair Service” for electricity and water charges.

The department issued a show cause notice on March 6, 2013, demanding a total amount of Rs.1,47,74,774, including CESS, and also proposed to disallow certain CENVAT credit availed on input services. The appellant contended that both electricity and water are considered “goods,” and thus, no service tax should be imposed on these utilities.

The tribunal supported the appellant’s argument, asserting that the supply of water and electricity did not attract service tax, citing Notification No. 12/2003 dated June 20, 2003.

Case Title: GMR Hyderabad International Airport Ltd Versus Commissioner of Central Excise & Service Tax, Hyderabad – IV; Case No.: Service Tax Appeal No. 20883 of 2014

READ/DOWNLOAD THE JUDGEMENT HERE

To know more on Service Tax applicability on Airport Services CLICK HERE

To Read the Article ” CBIC clarification on Taxability of Gangajal” CLICK HERE

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