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TMI Blog2021 (1) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... GST (if paid) can be recovered from the tenant or otherwise is a civil matter which has to be decided in terms of the agreement entered into by the two parties and the Advance Ruling authority is not empowered to comment on such issues - The Advance Ruling is restricted to following questions: a. When landlord charges electricity or incidental charges in addition to rent as per Lease Agreement for immovable property rented to the tenant, is landlord liable to pay GST on electricity or incidental charges charged by it? b. Can electricity charges paid by landlord to Torrent Power Ltd. (the supplier of electricity) for electricity connection in the name of landlord and recovered based on sub meters from different tenants be considered as amount recovered as pure agent of the tenant when the legal liability to pay electricity bill to Torrent Power Ltd. is that of landlord? In the instant case, there is no charge towards commission and packing and as such the same is ruled out. Thus, the only two possible inclusions are the incidental expenses and amount charged for anything done by the supplier. The includible charges are to be examined in terms of the language employed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sub-meter - the lessee was supposed to pay the electricity charges directly to the electric company as per the actual usage in terms of the agreement. However, for the failure of the lessor to obtain a separate electric meter for the premises rented to the lessee, they have mutually agreed to collect the electric charges on the basis of actual usage based on the sub-meters and onward payment to the electric company. At this juncture, it is noteworthy to mention that the lessee is Govt. of India and as such would by no means pay any amount in excess or lower than the actual electric power used by them. With a purpose to ensure such actual payment, the lessor i.e. the applicant has installed a sub-meter for the lessee. Thus, it is purely a reimbursable expense made by the lessee which is collected on actual usage of the electric power. Secondly, if at all the amount was not be charged on actual usage basis, it would have been all the more easier for both the parties to fix a certain amount towards electricity charges in the agreement itself. However, this has not been done which clarifies the intent of both the parties that the charges towards electric power usage would be on actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly incidental expenses in respect of supply of service of renting or immovable property. They are charging GST on electricity charges, recovered as a part of total consideration for renting of immovable property and recovering the same from other tenants and is also paying GST to respective governments. 4. The applicant further submitted that they have taken opinion from different GST consultants and advised that electricity charges or incidental charges are in relation to composite supply of principal service of renting of immovable property, any incidental charges or expenses in respect of supply of service shall form part of value of taxable supply in terms of clear provisions of Section 15 of the CGST Act, 2017. 5. The applicant submitted that in terms of clause 9 of the agreement, the Govt. of India shall pay all charges in respect of electric power, Air-conditioning charges, light and water used along with the applicable taxes thereon for the said premises during the continuance of these presents . Further, the applicant has bonafide believe that in terms of Section 15 (1) of CGST Act, 2017 they are liable to pay GST on rent including electricity charges and other i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectricity or incidental charges in additional to rent as per Lease Agreement for immovable property rented to the tenant, is landlord liable to pay and recover GST from tenant on electricity or incidental charges charged by it? 2. Can electricity charges paid by landlord to Torrent Power Ltd. (the supplier of electricity) for electricity connection in the name of landlord and recovered based on sub meters from different tenants be considered as amount recovered as pure agent of the tenant when the legal liability to pay electricity bill to Torrent Power Ltd. is that of landlord? Applicant s interpretation of law and/or fact 8. The applicant submitted that in terms of provision of Section 15(1) of the CGST Act, 2017, the value of supply shall be the transaction value, which is the price actually paid or payable for the said supply. Further, in terms of provisions of Section 15(2), the value of supply shall include incidental expenses charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of supply of goods or services. 9. The applicant further submitted that in terms of the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the submissions made by the Applicant in their application for advance ruling. We have also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts the applicant s interpretation of law. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act. 13. The questions raised by the applicant for an advance ruling are: 1. When landlord charges electricity or incidental charges in additional to rent as per Lease Agreement for immovable property rented to the tenant, is landlord liable to pay and recover GST from tenant on electricity or incidental charges charged by it? 2. Can electricity charges paid by landlord to Torrent Power Ltd. (the supplier of electricity) for electricity connection in the name of landlord and recovered based on sub meters from different tenants be considered as amount recovered as pure agent of the tenant when the legal liability to pay electricity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the electricity charges are incidental charges collected by them in relation to the supply and as such the same was liable to be added to the value of supply in terms of Sec. 15(2)(c) of the CGST Act, 2017. It is important to go through the said provisions and as such the text of the same is reproduced under: (2) The value of supply shall include - (a) _ _ _ _ _ _ (b) _ _ _ _ _ _ _ (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; The language employed indicates that the following amount is includible in the value: incidental expenses charged by the supplier to the recipient of the supply; commission and packing any amount charged for anything done by the supplier in respect of the supply of goods or services or both In the instant case, there is no charge towards commission and packing and as such the same is ruled out. Thus, the only two possible inclusions are the incidental expenses and amount ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a total area of 3453.3 Sq. Mtrs. equivalent to 37158 Sq. ft along with all internal infrastructure as described in Schedule B at the rate of 56 Sq. Ft. Per month totally amounting to ₹ 20,80,848/- per month + service tax as per prevailing norms, to be made on the 1st day of each month starting from 1st January 2016 which also includes maintenance charges and municipal taxes. 9) the Govt. of India shall pay all charges in respect of electric power, Air-conditioning charges, light and water used along with the applicable taxes thereon for the said premises during the continuance of these presents . 10) The LESSOR shall execute necessary repairs usually made to premises in that locality and may be specified by the Government of India in a notice in writing within such time as may be mentioned therein and if the LESSOR fails to execute any repairs in pursuance of the notice, the Govt. of India may cause the repairs specified in the notice to be executed at the expense of the LESSOR and the cost thereof may without prejudice to any other mode of recovery, be deducted from the rent payable to the LESSOR. The agreement is in respect of letting out of the space ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the sentence is to be constructed by applying linguistic principles which would mean that the Govt. of India shall pay the charges to the concerned supplier. ii) The words electric power make it all the more clear that the charges in respect of electric power have to be made. iii) The word used makes it clear that the charges are in respect of actual usage of electric power The above indicates that the applicant has cast an onus on the lessee to pay the charges in respect of the electric power used by them directly to the electricity company. Further, the above two clauses clear mean that both are independent of each other and the applicant has agreed upon to charge the fixed amount as per clause 3 towards the supply of services, whereas, the applicant has cast an onus on the lessee to pay the actual electric power charges in respect of the power used by the lessee. 15.2 In view of such an agreement, it cannot be said that the electricity charges would be covered by Sec. 15(2)(c) of the CGST Act, 2017 for the sole reason that the rate for renting of premises has been fixed at an amount and the electricity charges are to be borne by the lessee as per the actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant has installed a sub-meter for the lessee. Thus, it is purely a reimbursable expense made by the lessee which is collected on actual usage of the electric power. Secondly, if at all the amount was not be charged on actual usage basis, it would have been all the more easier for both the parties to fix a certain amount towards electricity charges in the agreement itself. However, this has not been done which clarifies the intent of both the parties that the charges towards electric power usage would be on actual basis. 16.2 The above discussion read with the agreement entered into between the applicant and the Govt. of India makes it expressly clear that the agreement contains an inbuilt clause of actual payment of electric charges by the lessee directly to the electric company. However, due to lack of infrastructure on the part of the lessor, there is a silent agreement between both the parties that the applicant will collect the actual usage charges on the basis of the reading of the sub-meter and in-turn pay the same to the electric company. Since this arrangement has been on-going since such a long time, it can be clearly said that there is a mutual understanding betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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