2025 (3) TMI 160 - AAR - GST

Levy of GST - reimbursement of electricity charges on actual basis - HELD THAT - As per para (a) of explanation of rule 33 pure agent is a person who enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both - In Circular No. 206/18/2023-GST dated 31st October 2023 it has been clarified that where the Real Estate Owners Resident Welfare Associations (RWAs) Real Estate Developers etc. charge for electricity on actual basis that is they charge the same amount for electricity from their lessees or occupants as charged by the State Electricity Boards or DISCOMs from them they will be deemed to be acting as pure agent for this supply. In the instant case the applicant has enclosed copy of electricity bill along with invoice issued by the applicant to its sub-lessee towards Reimbursement of power charges wherefrom it appears that applicant collects the actual cost of electricity consumed by the sub-lessee - The fact of the case involved in the instant case is identical to the clarification given in the Circular No. 206/18/2023-GST dated 31st October 2023. The applicant here will be deemed to be acting as pure agent in regard to supply of electricity to its sub-lessee and the reimbursement amount shall not be a part of his value of supply. Conclusion - The applicant is not liable to pay GST on reimbursement of electricity charges on actual basis.

Summary

ISSUES PRESENTED and CONSIDERED1. Whether GST is liable to be paid on reimbursement of electricity charges on an actual basis.ISSUE-WISE DETAILED ANALYSISThe applicant sought an advance ruling on whether GST is payable on the reimbursement of electricity charges on an actual basis. The applicant argued that the reimbursement of electricity charges should not be considered a supply under the CGST Act as the applicant acts as a pure agent of the lessee. The applicant relied on Rule 33 of the CGST Rules and Circular No. 206/18/2023-GST to support their position. The Revenue also opined that no GST is liable on such reimbursement.The Authority analyzed the agreement between the applicant and the sub-lessee, which outlined the terms regarding the lease of premises and reimbursement of electricity charges. The Authority considered the conditions of Rule 33 and the concept of a pure agent in determining whether the reimbursement of electricity charges should be subject to GST.The Authority referred to a previous case involving common area electricity charges and the treatment of electricity supply in a composite supply scenario. The Authority compared the facts of the instant case with the principles established in the previous case and the relevant circular to reach a conclusion.SIGNIFICANT HOLDINGSThe Authority ruled that the applicant is not liable to pay GST on the reimbursement of electricity charges on an actual basis. The ruling was based on the finding that the applicant acts as a pure agent in supplying electricity to the sub-lessee, and therefore, the reimbursement amount should not be considered part of the value of supply.The ruling provides clarity on the tax treatment of reimbursement of electricity charges in specific leasing arrangements, emphasizing the application of the pure agent concept under the GST framework.