HC stays 1,100cr GST demand on Tantransco

Chennai: Madras high court has stayed the operation of a GST notice issued to the state-owned Tamil Nadu Transmission Corporation (Tantransco) demanding payment of 1,100 crore as service tax.
Justice Krishnan Ramasamy passed the interim orders on a plea moved by the corporation, claiming that its service was exempt from payment of service tax even prior to the GST regime.
The court directed the GST department to defer the inquiry proceedings related to four show-cause notices issued to Tantransco for the financial years 2017-2018, 2018-2019, 2019-2020, and 2020-2021. Representing Tantransco, Senior advocate P Wilson submitted that the corporation, a transmission utility entity, is engaged in transmitting generated electric power to various consumers within the state of Tamil Nadu, as per the Electricity Act.
He argued that these activities prior to the GST regime were entirely exempt from the payment of service tax. However, after introducing the GST regime in 2017, the GST department conducted an audit assessment and issued four show-cause notices for the financial years 2017-2021, claiming a tax liability of 1,100 crore.
He contended that these notices were a complete violation of Section 65 of the CGST Act 2017, read with Rule 101 of the CGST Rules 2017. The show-cause notices were based solely on the observations made by the GST audit team, which cited inward supplies of goods as capital assets of Tantransco. The department demanded GST on these values, treating them as though they represented consideration for the supply, which formed the basis for the tax claims, he said.