Electricity Not Treated as Fuel; 18% GST Applicable on Services

The applicant, M/s JBM Ecolife Mobility Surat Pvt. Ltd., was engaged in providing end-to-end operation and maintenance services of electric buses in Surat under the National Electric Bus Program. The company operated buses under a Gross Cost Contract model, where it supplied, maintained, and ran buses while receiving consideration based on per-kilometre usage. The buses were deployed under a concession agreement initially with Surat Municipal Corporation and later assigned to Surat Sitilink Ltd.

The applicant raised invoices monthly based on the total distance travelled. It classified its services under SAC 996601 as rental services of vehicles with operators and claimed that since buses run on electricity, the issue arose whether electricity qualifies as “fuel” for applying concessional GST rates (5%/12%). The applicant argued that electricity is not fuel and hence the service should fall under the residual category taxable at 18%.

Issue Before Court: Whether electricity can be treated as “fuel” for the purpose of GST classification under Notification No. 11/2017-CT (Rate) and, consequently, whether rental services of electric buses qualify for concessional GST rates or attract 18% GST.

Tribunal Decided: The Gujarat Authority for Advance Ruling held that electricity cannot be classified as “fuel” for GST purposes. It is observed that fuel typically refers to combustible substances like petrol, diesel, or gas that produce energy through combustion, whereas electricity is a secondary form of energy and not a source that is burnt to generate power. Since the concessional rate under Entry 10(i) applies only where the cost of fuel is included in the consideration, and electricity does not qualify as fuel, the said entry becomes inapplicable.

As a result, the services provided by the applicant do not fall under the concessional category. The authority further clarified that the services would instead fall under the residual Entry 10(iii) covering rental services of transport vehicles with operators, thereby attracting GST at the rate of 18%.

To Read Full Order, Download PDF Given Below.