An inverter system will now be accounted for a two-tier taxation with 18 per cent GST towards the power backup machine and another 28 per cent on the battery connected with it.
The Central Board of Indirect Taxes and Customs (CBIC) has clarified that even if the UPS/ inverter and external battery are sold on the same invoice, their prices are separately known, and they constitute two separately identifiable items.
Accordingly, GST is payable at 18 per cent on UPS/ inverter (classifiable under heading 8504), and GST is payable at 28 per cent on external batteries (classifiable under heading 8507 for all batteries except lithium-ion battery).
The decision would force customers to bear an additional five-eight per cent of expenses on the overall tax payment amid a power crisis surging demand for inverter system.
Many traders faced issues with tax department that pointed out inadequate tax collection since 18 per cent GST was levied on the whole purchase although there were separate tax rates.
A PwC report said that the clarifications issued in light of conflicting advance rulings also pose an issue as to the binding nature of these circulars vis-a-vis the advance rulings issued to the specific taxpayer.
It is also interesting to note that a few clarifications have recognised the past industry practice and have sought to regularise the same, which would neither result in higher liability for the past, nor result in refund of taxes already paid in excess.