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2022 (2) TMI 827 - AAR - GSTLevy of GST - electricity charges paid to UPCL for the power consumed by residents in their residential apartments and recovered from them on actual cost basis - electricity charges paid to UPCL (Electricity supply authority) for the power consumed towards common area and recovered from residents on actual cost basis - Asset Replacement Deposits collected from residents - pure agent services - HELD THAT - A pure agent is one who while making a supply to the recipient also receives and incurs expenditure on some other supply on behalf of the recipient and claims reimbursement for such supplies from the recipient of the main supply and while the relationship between them in respect of the main service is on a principal to principal basis the relationship between them in respect of other ancillary services is that of a pure agent but the important thing to note is that a pure agent does not use the goods or services so procured for his own interest and this fact has to be determined from the terms of the contract. Hence to ascertain the above facts proper scrutiny of the documents submitted by the applicant with the instant application is imperative. From the lease deed and maintenance and facilities agreement there are no doubt in coming to the conclusion that the services offered by the applicant is a wholesome and combined package of services which cannot be performed without the supply of electricity (water also) to the infrastructure which in an integral part of the Community - and once an Lessee there is no option available for himself or herself to disassociate him or her from the ambit of the services so provided by the Lessor and opt only for paying electricity charges (and for that matter water charges if applicable) on actual consumption basis without availing any other services as the Lessee has no other option. This fact is evidently established as in the LEASE DEED it has been clearly mandated that with the execution of the Lease Deed the Lessee(s) have signed a separate agreement with the Lessor (the Maintenance Facilities Agreement ) for the provision of certain services including the maintenance and operation of the Club and the Common Area as set out in the Maintenance Facilities Agreement (the Services ). The term have signed a separate agreement suggest that it is compulsory and not optional. In the instant case it is found that the applicant is using Electricity procured from the UPCL (Electricity supply authority) for furtherance of his interest in as much as all the infrastructure developed by them is fully dependent on the electricity (and for that matter water also) and in turn the services of MIANTENANCE FACILITIES so offered to the Community is absolutely dependent on the electricity - the applicant does not fulfil two criteria out of the four as specified in explanation to Rule 33 of the CGST Rules 2017 to be considered as a pure agent hence we hold that the electricity charges paid to the UPCL (Electricity supply authority) for the power consumed by residents in their residential apartments and recovered from them on actual cost basis and the electricity charges paid to the UPCL (Electricity supply authority) for the power consumed towards common area and recovered from residents on actual cost basis are liable to GST. Whether the amounts collected by the applicant towards Asset Replacement Deposits would form part of consideration towards the services being provided by them or not? - HELD THAT - There are certain distinguishable features of both advance and deposit and the advances differ from the deposits. We find that the applicant while seeking advance ruling has accepted the fact that in accordance to mutual agreement between the applicant and the residents and in order to meet any planned or unplanned capital outlay in future they recover an amount (on the basis of super area) known as Asset Replacement Deposits which would be non-refundable deposits - in the instant case as admitted these deposits are in accordance with the agreement and are directly proportional to the super area and are to meet any planned or unplanned capital outlay in future which is clearly a consideration to meet any contingency which may arose in future and hence there is no iota of doubt regarding the true picture of such deposits. Coining and using any other term to camouflage such deposits would not take away its basic characteristics of consideration . These deposits are to be charged from the residents/ owners for undertaking /execution of any services in future (planned or unplanned). And since these deposits are for services to be executed in future they would be non-refundable in nature and would depend upon the super area taken on lease by the service recipient/ resident/owner and by all means this is an advance sought for by the applicant for future supply of services. The basis for calculating these amounts is directly proportional to the super area taken on lease as per the lease deed executed between them is indicative of fact that the element of service is inbuilt although for a future date - In the instant case the applicant receives the payment earlier and hence the time of supply is the date of receipt of amount towards the Asset Replacement Deposits therefore the said amounts are liable to GST as they are advances towards future supply of services and not the deposits and hence liable to GST at the time of issuing/raising of debit notes. Asset Replacement Deposit is a consideration being collected by the applicant for provision of supply.
Issues Involved:
1. Applicability of GST on electricity charges paid to UPCL for power consumed by residents in their residential apartments and recovered from them on an actual cost basis. 2. Applicability of GST on electricity charges paid to UPCL for power consumed towards common areas and recovered from residents on an actual cost basis. 3. Applicability of GST on Asset Replacement Deposits collected from residents. Analysis of the Judgment: 1. GST on Electricity Charges for Residential Apartments: The applicant, a registered Public Limited Company, provides services in a senior living community, including residential apartments and common facilities. They recover electricity charges from residents on an actual cost basis. The applicant argued that these charges should be exempt from GST as they are merely passing through the electricity costs charged by UPCL, which are exempt from GST. However, the authority found that the applicant does not meet the criteria of a "pure agent" under Rule 33 of the CGST Rules, 2017. The electricity charges are bundled with other services provided by the applicant, forming a composite supply, thus making them liable to GST. 2. GST on Electricity Charges for Common Areas: Similar to the charges for residential apartments, the applicant recovers electricity costs for common areas from residents. These charges are also argued to be exempt by the applicant. However, the authority ruled that these charges are part of the composite supply of services provided by the applicant, which includes maintenance and other facilities. As such, these charges are also liable to GST. The authority emphasized that the applicant's infrastructure and services are dependent on electricity, and thus, the electricity charges cannot be separated from the overall service package. 3. GST on Asset Replacement Deposits: The applicant collects Asset Replacement Deposits from residents to meet future capital outlays. These deposits are non-refundable and are calculated based on the super area of the apartments. The applicant contended that these deposits are merely transactions of money and do not constitute a supply under GST law. However, the authority found that these deposits are advances for future services and thus qualify as consideration under Section 2(31) of the CGST Act, 2017. The authority ruled that these deposits are liable to GST at the time of receipt, as they are advances towards future supply of services. Conclusion: The authority ruled that: 1. Electricity charges paid to UPCL for power consumed by residents in their residential apartments and recovered from them on an actual cost basis are liable to GST. 2. Electricity charges paid to UPCL for power consumed towards common areas and recovered from residents on an actual cost basis are liable to GST. 3. Asset Replacement Deposits collected from residents are considered advances for future supply of services and are taxable under Section 13(2)(a) of the CGST Act, 2017.
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