GST Not Applicable on Road Restoration Reimbursement by Power Distributor | HC

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GST on Road Restoration Reimbursement

Case Details: Torrent Power Ltd. vs. Union of India - [2025] 179 taxmann.com 548 (Gujarat)

Judiciary and Counsel Details

  • Bhargav D. Karia & Pranav Trivedi, JJ.
  • S.N. Soparkar, Sr. Counsel & Uchit N. Sheth for the Petitioner.
  • Ms Hetvi H. Sancheti for the Respondent.

Facts of the Case

The petitioner, engaged in the business of transmitting and distributing electricity, submitted that it excavated roads owned by the Ahmedabad Municipal Corporation (AMC) for the purpose of laying and maintaining electricity lines and reimbursed the AMC for the restoration costs. The GST Authority alleged that these reimbursements were subject to GST under the reverse charge mechanism. It was submitted that the payments constituted statutory compensation. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the reimbursements did not constitute a supply under Schedule II of the CGST Act and the Gujarat GST Act. It was observed that the AMC recovered costs as part of its municipal function and did not agree to tolerate the excavation. It further noted that statutory provisions under Section 42, read with Section 67(3), of the Electricity Act, 2003, and Article 243W mandated full compensation without constituting consideration for supply. Consequently, the Court quashed the Show Cause Notice and Order-in-Original.

List of Cases Reviewed

List of Cases Referred to

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied