GST Rate of 18% Applicable on Charging Electric Vehicle Batteries at Public Charging Stations, Rules Karnataka Authority for Advance Ruling
- ByStartupStory | July 23, 2023
The Karnataka Authority for Advance Ruling (AAR) has clarified that a Goods and Services Tax (GST) rate of 18% will be applicable on charging electric vehicle (EV) batteries at public charging stations. The matter came up before the AAR when a power distribution company sought to establish various public charging stations for EVs. The company intended to charge tax and collect an electric vehicle charging fee, comprising energy charges and service charges.
The primary issue revolved around whether the energy charges should be treated as a supply of goods or a supply of services. If considered as a supply of goods, the company could claim exemption under GST, as the supply of electricity—classified as a good—is exempt under the Act. Hence, the ruling authority was tasked with determining whether EV charging falls under the category of supply of electricity or not.
The AAR clarified that charging an EV involves converting electric energy to chemical energy in the battery. While electricity is classified as a good, it is not supplied as such to the consumer but is converted into chemical energy within the EV battery. The AAR cited a clarification issued by the Ministry of Power, which stated that charging an EV does not involve selling electricity to any person as the electricity is consumed within the premises owned by the charging station.
Consequently, the AAR ruled that charging an EV is a supply of service, not a supply of electricity or any movable property. It determined that ‘supply of electrical energy’ and ‘service charges’ together should be treated as a supply of service, attracting a GST rate of 18%. The company is entitled to set off its tax liabilities against input tax credits.
This clarification by the AAR brings clarity to the tax implications on EV charging services and aims to facilitate the growth of the electric vehicle ecosystem in the state of Karnataka.
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