In a matter having "large ramifications," the Supreme Court on Thursday said that it will examine whether goods and services tax (GST) under reverse charge basis can be levied on companies for payments made to municipal bodies for repair and restoration work of roads and pavements after laying down the electricity distribution lines.
A bench led by Justice Manoj Misra sought a response from Torrent Power on an appeal by the GST department seeking to tax the transactions made to Ahmedabad Municipal Corporation (AMC) for road restoration work.
In September, the Gujarat High Court ruled that the reimbursement of road restoration charges by an electricity distribution company to a civic body was not a taxable service. It said that it was mandatory for the distribution licensee to make compensation for damage caused while laying down the distribution lines by digging up the road.
However, it rejected the stand of the department that such restoration or repairing of the road was not within the scope of the sovereign function of the civic body.
The HC had held that the repair and restoration work of any damaged road was the function of the municipality and the reimbursement of the repairing and restoration charges of the damaged road by Torrent as per the provision of the Electricity Act 2003 would not be covered by the scope of supply as per the Central Goods and Services Tax Act, 2017 in any manner whatsoever by any stretch of imagination.
A bench led by Justice Manoj Misra sought a response from Torrent Power on an appeal by the GST department seeking to tax the transactions made to Ahmedabad Municipal Corporation (AMC) for road restoration work.
In September, the Gujarat High Court ruled that the reimbursement of road restoration charges by an electricity distribution company to a civic body was not a taxable service. It said that it was mandatory for the distribution licensee to make compensation for damage caused while laying down the distribution lines by digging up the road.
However, it rejected the stand of the department that such restoration or repairing of the road was not within the scope of the sovereign function of the civic body.
The HC had held that the repair and restoration work of any damaged road was the function of the municipality and the reimbursement of the repairing and restoration charges of the damaged road by Torrent as per the provision of the Electricity Act 2003 would not be covered by the scope of supply as per the Central Goods and Services Tax Act, 2017 in any manner whatsoever by any stretch of imagination.
