GST UPDATE

????Desk of CA. Praveen Sharma 653Series (CAPS)????

DELHI HIGH COURT IN THE CASE OF Central Electricity Regulatory Commission  Section 2(17) and Section 7 of the CGST Act, 2017

?The Central Electricity Regulatory Commission (CERC) and Delhi Electricity Regulatory Commission (DERC) challenged GST Show Cause Notices (SCNs) alleging GST liability on fees received for regulatory functions under the Electricity Act, 2003. 

?The respondents argued that these fees constituted "support services" under GST law and were taxable.

?Key Issues

?Whether fees collected by CERC and DERC for regulatory functions fall under taxable "supply of services."

?Whether these bodies can be categorized as engaged in "business" under GST law.

?Applicability of the exemption for services rendered by courts and tribunals under Schedule III of the CGST Act.

?Court Findings:

?Regulatory functions, including tariff determination and licensing, do not qualify as "supply" under GST as they are statutory obligations, not business activities.

?Fees received are not "consideration" in the course of business as defined under Section 2(17) and Section 2(31) of the CGST Act.

?CERC and DERC function as quasi-judicial bodies with the trappings of a tribunal. 

?Their activities are exempt under Schedule III of the CGST Act.

The attempt to bifurcate regulatory and adjudicatory functions for taxability is unsustainable.

?Conclusion : The High Court quashed the SCNs dated 29 May 2024 and 23 July 2024, along with the related Order-in-Original dated 30 August 2024, holding them invalid. It affirmed that regulatory functions performed by statutory bodies like CERC and DERC are not taxable under GST.