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2021 (1) TMI 1255 - AAAR - GSTValuation of supply of services - act of recovering electricity expenses by the appellant - Pure Agent Services or not - Whether reimbursement of electricity expenses, by the lessee to lesser (appellant) would form part of taxable value? - HELD THAT - In the instant case, reimbursement of electricity expenses had not been made on actual basis, by the lessee to lesser as it had been collected in advance with rent and further adjusted by raising the invoice/bill/memo/document by the lessor. Further, the appellant has failed to establish themselves as a pure agent. Therefore, in the instant case, the so called reimbursement of electricity expenses would form part of taxable value in term of clause (c) subsection (2) of section 15 of the CGST Act, 2017 - appellant is not working as pure agent. The appellant has stressed upon Ruling given by the Authority for Advance Ruling Gujarat in the case of IN RE M/S. GUJARAT NARMADA VALLEY FERTILIZERS CHEMICALS LTD., 2021 (1) TMI 596 - AUTHORITY FOR ADVANCE RULING, GUJARAT - In this regard, it is opined that these orders have not been passed by the higher forum than the present one; therefore, the same are not being considered. Appeal disposed off.
Issues Involved:
1. Whether the act of recovering electricity expenses by the appellant is covered under the category of pure agent. 2. Whether the reimbursement of electricity expenses by the lessee to the lessor forms part of the taxable value. Issue-wise Detailed Analysis: 1. Pure Agent Status: The primary issue addressed was whether the appellant acted as a "pure agent" when recovering electricity expenses from the lessee. The provisions of Rule 33 of the CGST Rules, 2017, which define the conditions for a supplier to be considered a pure agent, were examined. These conditions include: - The supplier acts as a pure agent when making payments to third parties on behalf of the recipient. - The payments made by the pure agent are separately indicated in the invoice. - The supplies procured by the pure agent are in addition to the services provided on their own account. The judgment noted that the rent agreement did not explicitly authorize the appellant to act as a pure agent. There was no specific mention of "reimbursement" in the agreement, and the appellant did not enter into a contractual agreement to incur expenses as a pure agent. Therefore, the appellant did not satisfy the conditions under Rule 33, and the act of recovering electricity expenses could not be considered as performed by a pure agent. 2. Taxable Value of Reimbursement: The appellant argued that the reimbursement of electricity expenses should not form part of the taxable value, citing the Gujarat Narmada Valley Fertilizers and Chemicals Ltd case. However, the judgment found that the reimbursement of electricity expenses was collected in advance with the rent and adjusted through invoices issued by the lessor. This method of collection did not meet the criteria for actual reimbursement as required under the CGST Act. The judgment held that the reimbursement of electricity expenses would form part of the taxable value in terms of clause (c) of sub-section (2) of section 15 of the CGST Act, 2017. The appellant's failure to establish themselves as a pure agent and the method of collecting electricity expenses in advance with the rent led to this conclusion. Conclusion: The appeal was dismissed, and it was concluded that the appellant was not acting as a pure agent. Consequently, the reimbursement of electricity expenses by the lessee to the lessor formed part of the taxable value. The judgment emphasized that the conditions for being a pure agent were not met, and the manner of collecting electricity expenses did not qualify as actual reimbursement, thus making it taxable under the CGST Act, 2017.
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