Whether GST on Charging Electric Vehicle (EV) is chargeable @ 18% or it is exempt? Whether it is sale of Electricity which is exempt by virtue of exemption notification?

Charging Point of Electric Vehicle (EV) is on the rise and will increase further. The question arises as to whether GST on Charging Electric Vehicle (EV) is chargeable @ 18% or it is exempt?

One may first note that the supply of electrical energy is a sale of electricity and it is exempt from GST under the exemption notification issued in respect of the goods.

It may be recalled that the Ministry of Power in its clarification relating to the requirement of licensing by the charging stations under the Electricity Act, 2003 clarified that charging of an EV battery by a charging station involves a service requiring the consumption of electricity by the charging station. However, the activity does not involve any sale of electricity.

For ease of reference and access, the relevant para of the said clarification reads as under:

“The charging of battery essentially involves utilization of electrical energy for its conversion to chemical energy, which get stored in the battery. Thus, the charging of battery of an electric vehicle by a charging station involves a service requiring consumption of electricity by the charging station and earning revenue for this purpose for the owner of the vehicle. The activity does in any way includes sale of electricity to any person as electricity is consumed within the premises owned by the charging station which may be connected to the distribution system or otherwise for receiving electricity. By the same logic, the activity does not involve further distribution or transmission of electricity.”

One may carefully note that the above clarification categorically provides that the activity by charging station would qualify as services of charging the battery and thus the stations would not require any license under the Electricity Act as such.

If one stretches the above position to the  GST Act (i.e. charging of EV by PCS is supply of service), the activity of charging would attract GST at the rate of 18%. However, the supply of electrical energy, if treated as sale of electricity, the same would be exempted from GST under the exemption notification issued in respect of the goods

Thus the only question that arises in the given case vis a vis in the context of GST is whether the charging of battery is an activity of supply of electricity (as goods) and thus exempted from GST or alternatively it is an overall charging services by the charging station which would be subject to GST at the rate of 18%.