Electric Bus Rental Services With Operators Attract 18% GST As Electricity Not 'Fuel': Gujarat AAR

The Gujarat Authority for Advance Ruling has held that the rental of electric buses with operators by JBM Ecolife Mobility in Surat will attract 18% GST, ruling that electricity cannot be treated as “fuel” to claim a lower tax rate.

The bench of Member (CGST) Vishal Malani and Member (SGST) Sushma Vora passed the ruling.

JBM Ecolife Mobility operates 150 air-conditioned electric buses in Surat and is paid a fixed ₹59.29 per kilometre under its contract. It approached the Authority to determine whether its bus rental service would be taxed at 5%, 12% or 18% GST, specifically whether it could claim the lower rate available where the cost of fuel is included in the consideration.

The Authority said the concessional rate applies only where the cost of fuel is included in the consideration for renting motor vehicles, making it necessary to examine whether electricity can be treated as “fuel”.

Referring to dictionary meanings, the Authority noted that fuel is generally understood as something that is burned to produce energy. It then explained that electricity is different in nature and is not generated through combustion at the point of use but is energy transmitted after being produced from primary sources.

“Electricity is a flow of charge generated by converting primary sources such as the thermal energy from burning coal or the kinetic energy of wind.”

The Authority also pointed out that the GST framework treats electric vehicles as a separate category and does not equate electricity with fuel. Once electricity was held not to be fuel, the Authority said the issue of whether fuel cost is included in the consideration no longer arises.

“Since the legislature chose to use the specific term 'Battery operated Vehicle' in one instance and 'fuel in another, the latter cannot be broadened to include electricity by implication. Consequently, as electricity is found to fall outside the scope and definition of 'fuel, the secondary question-whether fuel costs are included in the total consideration-becomes redundant. Therefore, in view of the discussions mentioned supra, we hold that the applicant would be covered under Entry No. 10 (iii) of Notification No. 11/2017-CT(R) dtd. 28.06.2017 attracting GST @ 18%..”

It found that the rental service of electric buses with operators does not fall under the concessional entries applicable to motor vehicles and instead falls under Entry 10(iii) of the GST rate notification.