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Applicability of service Tax on Electricity Meter Rent.

Sandip Kumar Sen (Sr.Manager(F&A)) (114 Points)

09 July 2010

My company is in the business of distribution of Electricity to all category of consumers through Energy recording Meter. The consumers is billed by our company on energy charges so recorded in the energy meter so installed by the company, Meter Rent,other alied services like fuse call etc if any as per the prescribed rate of Regulatory commission.
Now Service Tax authority claimed to my company as service Tax on Meter rent collected from consumers,other alied services like fuse call etc so collected from consumers for the last five years.
Please advice whether the claim of service tax authority is correct. If correct than at what section. If not correct than in what section & any case law in this context.
This is very very very urgent,please advice for proper reply.

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8 Replies

Jeevesh Mehta (Advocate- Corporate Commercial & Indirect Tax Advisory) (861 Points)
Replied 12 July 2010

Dear Sandeep,

It would be very difficult to comment on this plat form. Department must have issued a Show CAuse Notice to you. A proper reply needs to be filed within time. it has to be examined that the department is claiming under which service heads.

For clarifications you may contact us at

Ph: 09811617186

admin @ mavenlegal.net

Meven Legal LLP

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Pradeep Kamath (Chartered Accountant) (134 Points)
Replied 20 December 2010

Dear Sandip,

I hope, now that the distribution of electricity has been exempted vide Notification No. 32/2010 and vide Notification No. 45/2010 for earlier periods, read with the department's Circular no 131 / 13/ 2010 – ST, your issue is resolved.

Regards,

Pradeep Kamath.

Sandip Kumar Sen (Sr.Manager(F&A)) (114 Points)
Replied 21 December 2010

Thanks for the referance of circular. But now again question was arises whether Transformer Rent so realised from consumer for supply of power is under the perview of service tax.

Pradeep Kamath (Chartered Accountant) (134 Points)
Replied 22 December 2010

Dear Sandip,

The circular makes it very clear that such charges are also exempt under the notification.

Regards,

Pradeep Kamath.

Sandip Kumar Sen (Sr.Manager(F&A)) (114 Points)
Replied 24 December 2010

Yes I read the notification & clarification as mentained above. But the question is that the Transformer Rent is not clearly indicated. Normal this situation arises in case of Bulk Consumers having connected load say 50 KW, party end Transformer is placed at consumer primises and it is provided by the consumer. But in few cases consumers were not able to procure Transformer but taking the same from Licensee on Rent basis. In that cases the Rent so paid by the consumers attaract service Tax?

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Pradeep Kamath (Chartered Accountant) (134 Points)
Replied 24 December 2010

Sandip,

As providing transformer on rent not being an essential activity having direct and close nexus with distribution business, this cannot come under the purview of the circular. I think then, if transformer can be called "machinery", renting them attracts service tax under section 65(105)(zzzzj) of the Finance Act, 1994.

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 24 December 2010

If the right to use the transfromer is transferred to the consumer, it maybe under VAT. If the control and possession is retained by the owner, then you may examine the entry- supply of tangible goods.

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