Madras High Court Halts Rs.1,100 Crore GST Demand on Tantransco:

Madras High Court Halts Rs.1,100 Crore GST Demand on Tantransco

 The Madras High Court has temporarily deferred a Rs.1,100 crore Goods and Services Tax (GST) demand issued to Tamil Nadu Transmission Corporation (Tantransco). The company opposed the tax demand and said that its services were not taxed before GST was introduced. Justice Krishnan Ramasamy provided temporary relief after Tantransco filed a petition. The court instructed to pause the inquiry related to four show-cause notices for the years 2017-18, 2018-19, 2019-20 and 2020-21. Tantransco, a transmission utility for power, is mandated to transmit electricity to consumers in Tamil Nadu under the Electricity Act. It was argued that before the implementation of GST in 2017, these services were free from service tax in entirety. After the implementation of GST, the department carried out an audit and later issued show-cause notices, declaring a tax liability of Rs.1,100 crore for the said years. The company said that these tax demands went against Section 65 of the CGST Act, 2017, and Rule 101 of the CGST Rules, 2017. The show-cause notices are said to have been issued only on the basis of the observations made by the GST audit team, wherein inward supplies of goods were recognized as capital assets of Tantransco. The tax department considered the transactions a supply for GST purposes and taxed the same, which forms the basis of the demand. Subject to the interim order of the court, tax inquiry proceedings against Tantransco remain suspended pending examination.