SC to Decide GST Applicability on Municipal Road Restoration Charges Paid by Utilities | Biz Flow Kit
The Supreme Court, in a case with far-reaching ramifications, held that it shall analyse whether goods and services tax (GST) under the reverse charge basis can be imposed on companies for payments made to municipal bodies for the repair and restoration of roads and pavements after laying the electricity distribution lines.
A bench led by Justice Manoj Misra asked for a reply from Torrent Power on an appeal by the GST department seeking to tax the transactions made to the Ahmedabad Municipal Corporation (AMC) for road restoration work.
The Gujarat High Court, in September, ruled that the service of a reimbursement of road restoration charges by an electricity distribution company to a civic body was not taxable. The distribution licensee should compensate for damage caused during the laying of distribution lines by digging up the road.
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It does not accept the department’s stand that such restoration or repairing of the road was not within the scope of the sovereign function of the civic body.
The High Court had held that the repair and restoration work of any damaged road was the operation of the municipality, and the reimbursement of the repairing and restoration charges of the damaged road by Torrent under the norms of the Electricity Act 2003 shall not be covered under the scope of supply as per the Central Goods and Services Tax Act, 2017 in any manner whatsoever by any stretch of imagination.
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