GST on Battery Energy Storage Systems: Tamil Nadu Advance Ruling
Battery Energy Storage System operations are taxable at 18% GST as support services, not exempt as electricity supply.
- Ruling
- Advance Ruling No. 9/ARA/2025, dated 29.01.2026
- Dated
- 22 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
- Varalakshmi Starch Industries asked if BESS operations qualify for electricity tax exemptions.
- The Authority ruled BESS is not electricity generation, transmission, or distribution.
- BESS services are classified as support services taxable at 18% GST.
- The applicant must register for GST in Tamil Nadu.
In short
The company asked the Tamil Nadu Authority for Advance Ruling (AAR) if their Battery Energy Storage System (BESS) business qualifies for the same GST exemptions as electricity generation or transmission. The authority decided that storing electricity is not the same as generating or distributing it. Because the service is classified as support for the power sector rather than the supply of electricity itself, it does not qualify for the exemptions.
What has changed
How it worked before
It was unclear whether BESS operations should be treated as the supply of electricity, which is exempt from GST, or as a taxable service.
What has changed
The authority confirmed that BESS operations are taxable at 18% under the category of support services to electricity transmission and distribution. This means businesses in this sector must now collect and pay GST on their capacity-based tariffs.
Who this affects
Businesses that develop, operate, or maintain Battery Energy Storage Systems (BESS) for power utilities.
An example
Imagine a company, PowerStore Solutions, that operates a battery storage facility for a local power grid. They previously assumed their service was exempt because it supports the electricity grid. Based on this ruling, they should now classify their service as support services to electricity transmission and charge 18% GST on their monthly invoices.
What you should do
If you operate a BESS business, you should review your tax filings to ensure you are charging 18% GST. Remember that an Advance Ruling only binds the company that asked and its specific tax office; it is not a law that applies to your business automatically, though it shows how the department views this activity.
If you do nothing
If you assume your BESS services are exempt and do not collect GST, you risk a tax demand from your local officer. You would then be liable for the unpaid tax, plus interest and potential penalties. Relying on a ruling that does not apply to you can lead to costly disputes during an audit.
The terms explained
- Battery Energy Storage System (BESS)
- A technology that stores electrical energy in batteries so it can be used later when needed by the power grid.
- Support services to electricity transmission and distribution
- A service category under GST for activities that help power companies move or manage electricity, rather than the act of generating or selling the power itself.
- Advance Ruling
- A formal decision by tax authorities on how GST applies to a specific business situation, intended to provide clarity for the applicant.
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, charging a fixed monthly capacity-based tariff. The applicant maintains the BESS and associated transmission infrastructure up to the delivery point.
Ruling
| Question | What the authority ruled |
|---|---|
| Exemption for standalone BESS | Not eligible for exemption Treated as a storage unit, not generation/transmission/distribution |
| Exemption for co-located BESS | Not eligible for exemption Ownership difference does not change the functional classification |
| Applicable GST rate and registration | 18% GST under HSN 998631 Applicant is required to take GST registration in Tamil Nadu |
The Authority ruled that BESS operations do not qualify as generation, transmission, or distribution of electricity and are therefore not eligible for the exemptions claimed under the specified notifications. Instead, the activity is classified as support services to electricity transmission and distribution. Consequently, the applicant is liable to pay GST at the rate of 18% and must obtain registration in the state of Tamil Nadu.
Reasoning
The Authority determined that BESS is a flexible asset used for storage and does not constitute a generating station or transmission/distribution utility under the Electricity Act, 2003. Because the applicant is not generating or supplying electricity, but rather providing a storage facility, the exemptions under Notification No. 02/2017-CT(Rate) and Notification No. 12/2017-CT(Rate) do not apply. The activity is correctly classified as **support services to electricity transmission and distribution** under HSN 998631. Therefore, the service is taxable at the standard rate of 18%.
Provisions relied on
- Section 98(4) of the CGST Act, 2017
- Section 98(4) of the TNGST Act, 2017
- Notification No. 02/2017-CT(Rate) dated 28-06-2017
- Notification No. 12/2017-CT(Rate) dated 28-06-2017
- Section 2(50) of the Electricity Act, 2003
- Rule 18 of the Electricity (Amendment) Rules, 2022
For the practitioner
This ruling clarifies that BESS operators cannot claim the tax exemptions available to electricity generation or transmission utilities. Practitioners should advise clients in the energy storage sector that their services are likely taxable as **support services to electricity transmission and distribution** at 18%. It settles the taxability of BESS operations, confirming that they are distinct from the utilities they support.
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.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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