The Karnataka Authority for Advance Ruling has said that 18% GST will be applicable on charging electric vehicle batteries at public charging stations.
Background
The topic arose when a power distribution company, Chamundeswari Electricity, wanted to set up various public charging stations for charging EVs.
It said that it wants to charge tax and an EV charging fee.
The latter would include two components—energy charges for the number of units consumed and the service charges for the services provided by the charging station.
Supply of goods or services?
The company wanted to know whether the energy charges would be treated as a supply of goods or a supply of services.
In case of the latter, 18 per cent of GST would be imposed.
In case of the former, the question was whether the company could claim exemption under GST as the supply of electricity—which is treated as a supply of goods—is exempt under the Act.
Therefore, the ruling authority had to decide whether EV charging would be included under the category of supply of electricity or not.
Not a supply of good, clarification
The AAR said charging an EV involves charging a battery, i.e., the conversion of electric energy to chemical energy.
Electricity, which is a ‘moveable’ property and classified as a good, is not supplied to the consumer directly as it is converted into chemical energy which the EV battery provides.
The Authority pointed to a clarification issued by the Ministry of Power, which said that charging an EV does not include the sale of electricity as it is consumed within the premises owned by the charging station.
Final ruling
Hence, the activity of charging an EV is not a supply of electricity or of any moveable property, but a supply of service.
As a result, ‘supply of electrical energy’ and ‘service charges’ together are to be treated as supply of service and would attract a GST rate of 18%.
Input tax credit
The company will also be entitled to set off its tax liabilities against its input tax credits.
This would not have been possible if no GST were imposed.
“The ruling may be viewed as a positive ruling by some industry players as treating EV charging activity as a taxable service will help them in availing input tax credit,” said Harpreet Singh, partner indirect tax at KPMG.
He said if EV charging is treated as a supply of goods, which is exempt under the GST law, ITC would have got blocked.
