Introduction
The GST on Additional Deposit received by Maharashtra State Electricity Transmission Co. Ltd. (MSETCL) has been clarified by a recent Authority for Advance Ruling (AAR). This blog explains how such deposits are taxed under GST, backed by official rulings and practical insights for Indian businesses.
What Did the AAR Say?
✅ Applicant: Maharashtra State Electricity Transmission Co. Ltd. (MSETCL)
✅ Query: Is GST applicable on extra amounts collected from end-users for completing power transmission works?
✅ Ruling: Yes — such additional deposits are taxable as consideration for supply under Section 2(31) of CGST Act, 2017.
Why is GST Levied on Additional Deposits?
- Treated as advance payment for supply of services.
- Falls under the definition of supply [Section 7, CGST Act].
- As per AAR, extra amounts collected are directly linked to work completion — hence, taxable.
- Refer: AAR Maharashtra, Order No. GST-ARA-41/2021-22/B-36 dated 24.05.2024.
Key Legal Basis
| Aspect | Explanation |
|---|---|
| Section 7 (Supply) | Covers all forms of supply for consideration. |
| Section 2(31) (Consideration) | Deposit used for work = taxable consideration. |
| Relevant Case | Maharashtra Electricity Transmission Co. Ltd. AAR 2024 |
Impact on Businesses
Here’s what power companies and contractors must keep in mind:
- Collect GST on any additional deposit taken for project work.
- Issue proper tax invoice for such deposits.
- Adjust Input Tax Credit (ITC) accordingly.
- Non-compliance can invite demand notices & interest.
Expert Tip
✔️ Practical View: Businesses should clearly segregate security deposits (non-taxable) and additional deposits for work (taxable) in agreements. This avoids disputes during GST audits.
Conclusion
The AAR ruling reinforces that GST on Additional Deposit is mandatory if the amount is towards supply of work or service. Businesses should review contracts, adjust tax treatment, and consult GST experts if needed.
👉 Need help managing GST compliance? Talk to Efiletax experts today!
Quick FAQ
Q1. Is GST charged on security deposits?
No, unless adjusted against future supply.
Q2. Is the AAR ruling binding?
Yes, but only for the applicant and tax authorities for that case. It sets a persuasive precedent for similar situations.
Summary
Maharashtra AAR ruled that GST on Additional Deposit applies when Maharashtra Electricity Transmission Co. collects extra funds for work completion. Such deposits count as consideration for supply under GST law. Businesses must tax them properly to avoid penalties.