18% GST to be charged on battery charging for EVs: Karnataka AAR

Company setting up charging stations would get input tax credit, it rules

The Karnataka authority for advance rulings (AAR) has held that 18 per cent goods and services tax (GST) be imposed on charging batteries used in electric vehicles.

Hearing a case of Chamundeswari Electricity Supply Corporation Ltd, the AAR said that input tax credit (ITC) would be allowed for the company.

The issue before the court was whether charging of battery is supply of goods or supply of services. In case of the former, no GST would be charged and in case of the latter 18 per cent of GST would be imposed.

The ruling may seem to be negative for those setting up battery-charging units if the instant case is considered as precedent in the court of law but experts said some companies may find it positive since ITC is available. If nil GST were imposed, ITC would not have been given taxes paid on inputs for setting up the station and supply of electricity.  

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Chamundeswari Electricity plans to set up public charging stations for electric two- and four-wheelers. The company said it will issue invoices for collecting electric vehicle charging fees. This would have two components: energy charges for the number of units consumed and the service charges for the services provided by the charging station.

The company sought to know whether both the charges are to be treated as supply of services or energy charges are to be treated as supply of goods. In case, energy charges are to be considered as supply of goods, will the tax not be charged for this component? The company also sought to know whether ITC would be available for this activity.

The authority ruled that both components are to be treated as supply of services and 18 per cent GST would be imposed on them. Besides, ITC would be available for the company.

"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.