SC to decide on GST on cos' repairing charges to civic body for power lines
This story was originally published at 17:25 IST on 7 May 2026
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NEW DELHI – The Supreme Court Thursday said it would decide whether goods and services tax under reverse charge basis should be levied on transactions of companies paying charges to municipal corporations for repairing and restoring the dug out portion of roads and pavements after electricity distribution lines have been laid there. A bench of Justice Manoj Misra and Justice Manmohan said it was an important issue and would have large ramifications.
The apex court issued a notice to Torrent Power Ltd. on the goods and services tax department's plea seeking to tax the transactions of payment of repairing or restoration charges to Ahmedabad Municipal Corporation. The bench said that the issue requires determination by the apex court through arguments and cannot be decided on the first hearing.
Initially, the top court questioned the goods and services tax department on the issue of supply of service by the municipal corporation to the company. It said Ahmedabad Municipal Corporation was performing the function of repairing under the Indian Constitution, and there was no supply of service by it under the Central Goods and Services Tax Act, 2017. However, it agreed to go more deeply into the issue after arguments by the department that the company was doing commercial activity for laying down power distribution lines.
Torrent Power is engaged in the business of transmission and distribution of electricity in Gujarat, Maharashtra and Uttar Pradesh. During the course of routine maintenance and network enhancement to distribute electricity, Torrent Power has to dig out tranches on public roads which are maintained by the municipal corporation. The dug out portion of the road and pavement is then repaired and restored by the municipal corporation.
Thereafter, the Ahmedabad Municipal Corporation recovers reimbursement of the repairing and restoration charges from Torrent Power, which are fixed based on the type of the road. In 2021, the tax department issued a notice to Torrent Power, seeking details of the road opening permit charges paid by the company to the municipal corporation as well as the goods and services tax paid on reverse charge basis on such services received from the civic body.
Opposing the notice, Torrent Power said transactions of payment of repairing or restoration charges to the civic body did not involve any taxable service, and therefore, the company was not liable to pay any tax on such charges on a reverse charge basis. Thereafter, the tax department passed a demand order against Torrent Power.
In September, the Gujarat High Court ruled 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. The contention of the tax department that such restoration or repairing of the road was not within the scope of the sovereign function of the civic body couldn't be accepted because it was the function of the municipality to repair and restore any damaged road, said the court.
The reimbursement of the repairing and restoration charges of the damaged road for laying down the distribution lines by Torrent Power 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, the high court said. Challenging the high court's order, the tax department moved the apex court.
On Thursday, shares of Torrent Power Ltd. ended 1.3% lower at INR 1,712.50 on the National Stock Exchange. End
Reported by Surya Tripathi
Edited by Avishek Dutta
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