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GST – Scope of Supply, Reimbursement of Roads Restoration Charges to Municipal Corporation by Electricity Distribution Company – Petitioner is an electricity distribution company. While carrying out maintenance and network enhancement, the petitioner is required to dig up public roads which are then repaired/restored by the Municipal Corporation. The Municipal Corporation recovers reimbursement of these repair/restoration charges from the petitioner – Demand of GST on reimbursement payments under Reverse Charge basis contending that the repair/restoration services rendered by the Municipal Corporation to the petitioner are taxable - Whether the reimbursement of road repair/restoration charges paid by the petitioner to the Municipal Corporation is liable to GST under RCM - HELD - The contention of the Revenue is that agreeing to tolerate the digging up of road by the Municipal Corporation (AMC) would be covered by sub-clause (e) of Clause 5 of Schedule II, and therefore, such agreement to tolerate the digging of the road would be covered within the scope of supply of service. Though the Revenue contention seems to be very attractive at the first blush, however, the AMC is not agreeing to tolerate the act of digging up of the road by the petitioner but under the provision of the Electricity Act, the petitioner being a distribution licensee is required to lay down the distribution lines and for that purpose it is mandatory for the distribution licensee to make the compensation for damage caused while laying down the distribution lines by digging up of the road – Further, the Municipal Corporation is obligated under Article 243W of the Constitution to repair and restore any damaged roads, for which it is recovering the reimbursement charges from the petitioner. This does not amount to the Municipal Corporation providing any taxable service to the petitioner. The road repair/restoration activity of the Municipal Corporation is a sovereign function exempted from GST - The reimbursement of the repairing and restoration charges of the damaged road for laying down the distribution lines by the distribution licensee would not be covered by the scope of supply as per Section 7(1) of the GST Act read with Schedule II, Clause 5(e) in any manner whatsoever - The reimbursement of road repair/restoration charges by the petitioner to the Municipal Corporation is not liable to GST under RCM - The impugned Show-cause notice and order demanding GST are quashed and the petition is allowed
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