July 28, 2010: The government has forfeited a service tax claim of over Rs 2,200 crore on Power Grid Corporation, a move that could facilitate smooth sailing for the proposed stake sale in the country's largest transmission utility. The finance ministry has issued a notification relieving the transmission utility of any liability towards payment of service tax, a government official said. The finance minister had withdrawn service tax on power transmission in the Union budget for 2010-11. Industry analysts said the move was good from the investor perspective as it removed a contingent liability from the balance sheet of the company. "It removes uncertainty and presents a clearer financial picture of the organisation," said the partner, infrastructure and real estate at consulting firm Ernst&Young, Kuljit Singh. The move will also lift confusion over the tax treatment of transmission services and help the company step up investment in the fund-starved sector. The decision will also benefit a host of state power utilities that were also slapped with showcause notices. Some utilities had approached courts and secured stay orders against the levy. Power Grid Corporation is one of the largest transmission utilities in the world with a network of about 74,297 circuit kms of transmission lines. The company has already set up a national grid with inter regional power transfer capacity of around 20,800 MW, which is being enhanced to 32,000 MW by 2012. It is investing Rs 55,000 crore in the Eleventh Plan to carry out the expansion plan. Source: The Economic Times