GST will be applicable at a rate of 18% on charging electric vehicle batteries at public charging stations, the Karnataka Authority for Advance Ruling said.
The matter came up before the AAR when a power distribution company wanted to set up various public charging stations for charging EVs. The company said that it intended to charge tax and collect an electric vehicle charging fee, which would include two components—energy charges and service charges.
Energy charge refers to the number of units of energy consumed.
The primary issue that arose was whether the energy charges would be treated as a supply of goods or a supply of services, and if the former, whether the company could claim exemption under GST as the supply of electricity—which is treated as a supply of goods—is exempt under the Act.
Therefore, the question before the ruling authority was whether EV charging would be included under the category of supply of electricity or not.
The AAR said that the activity of charging an EV involves charging a battery, i.e., the conversion of electric energy to chemical energy. Electricity, which is a ‘moveable' property and classified as a good, is not supplied to the consumer as such but is converted into chemical energy, which is received by the consumer in the EV battery, it said.
While clarifying its stance, the AAR also referred to a clarification issued by the Ministry of Power, which said that charging an EV does not in any way include the sale of electricity to any person as the electricity is consumed within the premises owned by the charging station, which may be connected to the distribution system for receiving electricity.
The ruling authority held that the activity of charging an EV is not a supply of electricity or a supply of any moveable property, but a supply of service.
It ruled that ‘supply of electrical energy' and ‘service charges' together are to be treated as supply of service and would attract a GST rate of 18%. It also said that the company will be entitled to set off its tax liabilities against its input tax credits.
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