The AAR reviewed this matter when a power distribution company called Chamundeshwari Electricity sought to establish multiple public charging stations for electric two-wheelers and four-wheelers.
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The main issue for the company was determining whether the energy charges should be classified as a supply of goods or a supply of services. If considered a supply of goods, the company would be eligible for GST exemption, as electricity is exempt under the Act as a good. Therefore, the AAR’s decision was crucial in deciding whether EV charging should be treated as a supply of electricity or not.
The AAR ruled that an electric vehicle involves the conversion of electric energy into chemical energy within the battery. It stated that the power consumed during the charging of EV batteries is considered a consumable, as electricity is being used within the premises of the charging station owner. Essentially, when an EV owner charges their vehicle at a public station, they are using the facilities and services of the charging station and thus are liable for GST.
As a result, the AAR clarified that the charging of an EV should be classified as a supply of service, not a supply of electricity or any movable property.
It remains to be seen if other states will follow Karnataka’s example and impose an 18% GST on EV charging. If this occurs, it will undoubtedly be a factor for potential EV buyers to consider and may counterbalance the various schemes and benefits offered by the government to promote the adoption of EVs in the country.