GST on Battery Energy Storage Systems (BESS) in Tamil Nadu
The Tamil Nadu Authority for Advance Ruling decided that Battery Energy Storage Systems (BESS) operations are taxable at 18% GST.
- Ruling
- Advance Ruling No. 9/ARA/2025, dated 29.01.2026
- Dated
- 29 Jan 2026
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- BESS operations do not qualify as electricity generation, transmission, or distribution.
- The activity is classified as support services to electricity transmission and distribution.
- BESS operators must register for GST and pay an 18% tax rate.
- Exemptions for electricity supply do not apply to energy storage services.
In short
The company asked if their Battery Energy Storage Systems (BESS) business qualified for GST exemptions meant for electricity suppliers. They argued that storing and discharging power is part of the electricity supply chain. The authority disagreed, stating that BESS is a support service rather than the actual generation or transmission of power.
What has changed
How it worked before
It was unclear whether BESS projects should be treated as electricity supply, which is exempt from GST, or as a taxable service.
What has changed
The authority ruled that BESS is a support service under HSN 998631, making it taxable at 18% GST. This means businesses in this sector must now register for GST and collect tax on their capacity-based service fees.
Who this affects
Businesses that develop, operate, or maintain battery energy storage systems for power grids.
An example
Imagine a company called 'PowerStore Solutions' that operates a large battery facility to help a local utility balance its grid. They might wonder if they are exempt from GST like the utility company. Based on this ruling, PowerStore Solutions would likely be required to register for GST and charge 18% on their service fees.
What you should do
If you operate a BESS project, you should review your tax classification. Remember that an Advance Ruling only binds the company that asked and its specific tax office; it is not a law that automatically applies to your business.
If you do nothing
If you assume this ruling does not apply to you and choose not to register or pay GST, you risk penalties and interest charges. A tax officer may disagree with your classification during an audit, leading to a demand for unpaid taxes plus potential fines. Always consult with a tax professional to confirm your specific liability.
The terms explained
- Battery Energy Storage Systems (BESS)
- Technology used to store electrical energy in batteries so it can be released back into the power grid when needed.
- Capacity-based tariff
- A fee charged for making a facility available for use, rather than a fee based on the actual amount of electricity sold.
- HSN 998631
- A specific classification code under the GST system used for support services related to the transmission and distribution of electricity.
The ruling in detail
Authority for Advance Ruling
M/s. INDIGRID 2 PRIVATE LIMITED
Advance Ruling No. 9/ARA/2025, dated 29.01.2026 · Tamil Nadu
Questions before the authority
- Whether the activity of development and operation of BESS when such BESS is put on a standalone basis i.e not with generation transmission and distribution utility, would amount to supply of electrical energy, and consequently be exempt from payment of GST in terms of Notification No. 02/2017-CT(Rate) dated 28-06-2017?
- Whether the activity of development and operation of BESS when such BESS is co-located (i.e put up with generation, transmission and distribution utility) would amount to supply of electricity and consequently be exempt from payment of GST in terms of Notification No. 02/2017-CT(Rate) dated 28-06-2017 or be eligible to nil rate of duty in terms of Sl. No. 25 of Notification No. 12/2017-CT(Rate) dated 28-06-2017?
- In the event the authority is of the considered view that the exemption shall not be available to the BESS projects whether standalone or co-located, then what will be the applicable rate of GST? Consequently, whether the applicant is required to obtain registration in the state of Tamilnadu?
Facts
The applicant is engaged in developing and operating Battery Energy Storage Systems (BESS) for various transmission, distribution, and trading agencies. They enter into Battery Energy Storage Purchase Agreements (BESPA) to provide storage and discharge facilities for electricity on a capacity-based tariff. The applicant maintains the BESS and associated transmission infrastructure to ensure grid balancing and continuous power flow.
Ruling
| Question | What the authority ruled |
|---|---|
| Exemption for standalone BESS | Not eligible for exemption under Notification No. 02/2017-CT(Rate) Treated as a storage unit assisting utilities, not as generation |
| Exemption for co-located BESS | Not eligible for exemption under Notification No. 02/2017-CT(Rate) or Sl. No. 25 of Notification No. 12/2017-CT(Rate) Ownership status does not change the functional classification |
| Applicable GST rate and registration | 18% GST under HSN 998631; registration required Classified as support services to electricity transmission and distribution |
The Authority ruled that BESS operations, whether standalone or co-located, do not qualify as generation, transmission, or distribution of electricity and are therefore not eligible for the requested exemptions. The activity is classified as support services to electricity transmission and distribution. Consequently, the applicant is liable to pay GST at 18% and must obtain registration in Tamil Nadu.
Reasoning
The Authority determined that BESS is a flexible asset used for storage and discharge, not a facility for the generation, transmission, or distribution of electricity as defined under the Electricity Act, 2003. Because the applicant charges a capacity-based tariff for the facility rather than selling electricity, the transaction is not a supply of goods. The activity is correctly classified as **support services to electricity transmission and distribution** under HSN 998631. Therefore, the specific exemptions for electricity supply or transmission services do not apply.
Provisions relied on
- Section 98(4) of the CGST Act, 2017
- Section 98(4) of the TNGST Act, 2017
- Section 103(1) of the CGST Act, 2017
- Section 103(2) of the CGST Act, 2017
- Section 104 of the CGST Act, 2017
- Section 2(23) of the Electricity Act, 2003
- Section 2(50) of the Electricity Act, 2003
- Notification No. 02/2017-CT(Rate) dated 28-06-2017
- Notification No. 12/2017-CT(Rate) dated 28-06-2017
For the practitioner
This ruling clarifies that BESS operators cannot claim the tax exemptions available to power generation or transmission utilities. Practitioners should advise clients in the energy storage sector that their services are likely taxable at **18% GST** as support services. It settles the classification issue for BESS, confirming that the nature of the service is storage, not the supply of electricity itself.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/9-indigrid_2_aar_order_compressed_0.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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