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How a Simple Tax Notice Triggered a Constitutional Question For years, Electricity Regulatory Commissions across the country functioned quietly within the specialised world of statutory regulation. Their offices were not commercial establishments competing in the marketplace. They did not advertise
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FAQ :
No, courts have ruled that statutory fees collected by regulatory commissions for performing their statutory and quasi-judicial functions cannot automatically be treated as taxable services under GST, as these activities do not meet the criteria of 'business,' 'supply,' and 'consideration'.
The main constitutional question was whether every statutory fee collected under the authority of law can be considered as consideration under GST, and if quasi-judicial and regulatory functions performed under statute can be treated as business activities.
The Delhi High Court, Karnataka High Court, Himachal Pradesh High Court, and Gauhati High Court have all ruled on this issue, with the Supreme Court affirming the Delhi High Court's decision.
Courts distinguish statutory fees from commercial consideration by noting that regulatory commissions are not commercial entities providing optional services in the marketplace; rather, entities are subject to statutory supervision, and the fees collected are part of this regulatory framework, not a payment for a commercial service.
No, the courts acknowledged the broad architecture of GST but insisted that it must remain disciplined by constitutional structure, emphasizing that 'business,' 'consideration,' and 'supply' are constitutional safeguards, not decorative expressions.
The enduring lesson is that even the broadest taxation regime, like GST, cannot transform every statutory collection into taxable consideration or every exercise of statutory authority into economic activity. Statutory authority stands on a different constitutional foundation than commercial enterprise.
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