Levy of GST— In the instant case, the applicant is a Punjab Government undertaking engaged in generation, transmission and distribution of electricity and is registered under Goods and Service Tax.  Transmission or distribution of electricity is exempt under GST Act, Vide notification No. 12/2017 dated 28th June, 2017 (Tariff heading 9969). for the generation of electricity, they use an essential raw-material require “Coal” which is procured from Coal India Limited (CIL). In order to comply with the guidelines laid down by the Ministry of environment and Forest, they are mandatorily required to get the raw coal washed before captive consumption for meeting the stipulated percentage ash. to undertake this activity, they have engaged some washeries in private sector on job work basis for the job of coal beneficiation who in turn supplies the washed coal to the applicant.

During the process of washing of coal at the washery/job worker, certain low quality coal is also generated which is commonly referred to as “Coal rejects” which is disposed off/sold directly by the washery/job worker in an environment friendly manner.

QUESTION(S) ON WHICH ADVANCE RULING IS SOUGHT

1. Whether the “coal rejects' whose invoice is raised by Applicant upon washery/job-worker, is taxable under GST Act and Compensation Cess Act in the hands of Applicant?

2. If the answer to above question is yes. whether applicant is eligible to avail Input Tax Credit (ITC) of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery/job worker for cleaning?

3. If the answer to above question is yes and ITC is admissible, what is the admissible proportion of Input Tax Credit?

Held that— Yes, Coal rejects are to be classified under HSN 2701 and are taxable at 5% GST Rate Rs. 400 PMT Compensation Cess.

Where the goods are being received in lots or installments. the registered person shall be entitled to take credit upon receipt of the last lot or installment. Thus, if the applicant fulfils the eligibility conditions as prescribed under section 16 of CGST Act, 2017 & PGST Act, 2017 and if the type of ITC do not fall under the categories prescribed under section 17 of CGST Act, 2017 & PGST Act, 2017. the applicant is eligible to avail Input Tax Credit of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery/job worker for cleaning. Further, the “principal” shall be entitled to avail ITC in relation to goods sent directly to the premises of job-worker.

The formula prescribed under Rule 42 of CGST & PGST Rules, 2017 for manner of determination of input tax credit in respect of inputs or input services and reversal thereof will be applicable in both cases i.e. GST and Compensation Cess. Therefore, the provisions prescribed under Rule 42 of CGST & PGST Rules, 2017 should be followed by the applicant and they have to make reversal in the proportion of exempt/taxable turnover.