9911796707
TMI Blog2021 (1) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... c. at agreed monthly rent. 3. The applicant submitted that CGST department was paying service tax on total consideration of rent including that on electricity charges to the applicant up to 30.06.2017. However, CGST department has stopped paying GST component on electricity and incidental charges from 01.07.2017 under the pretext that GST is not applicable in terms of Rule 33 of the CGST Rules, 2017 on such electricity charges even though such charges are clearly 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cidental charges for the period from 01.07.2017 to 31.07.2017 and also for subsequent periods; that Dy. Commissioner, CGST (Audit) vide letter dated 10.08.2018 stated that department is not legally entitled to make payment of electricity duty and requested to take up the matter with electricity company for exemption of electricity duty. 7. Accordingly, the applicant sought the Advance Rulings on the following questions : 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 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be considered as amount recovered as pure agent of the tenant as the legal liability to pay electricity bill to Torrent Power Ltd. is that of landlord. Personal Hearing 11. Personal hearing in the matter was held on 17.08.2020. Authorised representative appeared on behalf of the applicant and re-iterated the submission made in the Application. Discussion and Finding 12. We have considered 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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? 14. It is the claim of the applicant that 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 sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost as per the internal drawings and design provided by the LESSEE. 3) The LESSEE shall, subject to the terms thereof pay gross consolidated rent in monthly arrears for the Block Nos. "301,302,504,603, 801(A&B) & 804 of GNFC Ltd. at GNFC Infotower, S.G. Road, Bodakdev, Ahmedabad as described in Schedule "A" covering 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay all charges' indicates a mandate to the effect that the Govt. of India are to pay directly to whomsoever concerned. This is so because the phrase does not say that they shall pay to the supplier. The words to whom the payment is to be done are missing in the agreement and as such 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. 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 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 wil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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