9911796707
TMI Blog2022 (2) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2)(e) given as under: - (e) determination of the liability to pay tax on any goods or services or both; SUBMISSION AND INTERPRETATION OF THE APPLICANT; (1) That the appellant (hereinafter referred as "appellant" or "applicant" or "lessor", or "landlord") is a registered assessee under GST laws having GSTN - 08ACEPM8844J1X4. (2) That the appellant had undertaken construction of its building and decided to give different floors or offices of its building on rent or lease. (3) That the appellant had entered into an agreement with its tenant and the copy of the rent agreement is attached herewith for your ready reference. (4) That in accordance with the said rent agreement appellant had given 5,437 sq feet (3,526 sq ft on 7th floor and 1,911 sq ft on 6th floor) at its premises "Shanti One", Plot No 39, 11th A Road, Bachraj ji ka Bagh, jodhpur-342003 (Rajasthan) hereinafter referred as "the said premises", to the tenant on lease for a period 9 years and 11 months divided in 9 terms of 1 year each and 1 term of 11 months. (5) that the tenant needs to pay following amount in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (The copy of the said electricity bilI is also attached herewith) S.No. Details Bill Amount (Rs.) 1 Electricity Charge 36,214.20 2 Fixed Charge 20,250.00 3 Demand Surcharge 4 Power Factor Surcharge (+) Incentive (-) /Shunt capacitor (3%) 108.64 5 Unauthorized Consumption Amount 6 CT/PT/Meter Rent 7 Transformer Rent 8 Other 52.29 9 Rebates (-) (i) Voltage (ii) Solar/Sprinkler/Rural Rebate/Pre-Paid Meter Rebate 10 Total Nigam Dues(Sum of 1 to 9) 56,625.13 11 Electricity Duty 1,636.80 12 Water Conservation Cess 409.20 13 Urban Cess 613.80 14 Other Nigam Dues -548.95 15 Other Electricity Dues 16 Other Water Conservation Cess 17 Other Urban Cess ; 18 Other LED/Deferred Deposit 19 Adjusted Amount (Code) 20 Total Due Date Amount (Sum of 10 to 19) 58,735.98 21 Arrear Amount 22 Deferred Amount (Active Month) 23 State Gov. Bearer Amount (i) Tariff Subsidy (ii) HailStorm/Other Subsidy 24 Total Amount Before Due Date(SNO 20+21-22-23) 58,736.00 25 LPS 1,121.52 26 Total Amount After Due Date(Sum of 24 and 59,858.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the parties that the charges towards electric power usage would be on actual basis 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. Point on which advance ruling is sought for - The question/issue before you for determination is - (a) Whether reimbursement of electricity expenses, on actual basis, by the lessee to lessor would form part of taxable value? (b) If the answer to above is no. whether GST is levied on the reimbursement of expenses from the lessee by the lessor at actuals? (c) If answer to the above is yes, what is the rate of GST applicable to said reimbursement of expenses? Our Submissions (1) It is hereby submitted that our case is covered under clause (c) and (e) subsection (2) of Section 97 of CGST Act 2017 which reads as under - (c) determination of time and value of supply of goods or services or both. (e) determination of the liability to pay tax on goods or services or both. (2) At the outset, we would like to submit that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions are satisfied, namely,- (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient; (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation.- For the purposes of this rule, the expression "pure agent" means a person who- (a) 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; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rigeration Ltd. V. CST [2006] 3 STT 69 (Bang. CESTAT) Held, demand of Service Tax on entire amount reimbursed not sustainable. 4 Glaxo Smithkline Pharmaceuticals Ltd.v.CCE 2005 (188) ELT 171/1 STT 37 (Mum. - CESTAT). Held, Service Tax not leviable on expenses recovered. 5 Malabar Management Services (P.) Ltd. v. GST [2008] 14 STT 107 (Chennai- CESTAT) Held, amount received as reimbursement of staff salaries and infrastructural expenses not includible in value of taxable services. 6 Basti Sugar Mills Co. Ltd. v. CCE [2007] 10 STT 107 (New Delhi - CESTAT). Held, the definition of 'Management Consultant' makes it clear that what was envisaged from a consultant is advisory services and not actual performance of management function and that an ocean separates a Manager from a Management Consultant, a performer from an advisor or a coach. 7 Jindal Vijayanagar Steel Ltd. v. CCE 2005 (192) ELT 415 (Trib. - Bang.) Held that 'extended period was not inviable especially as fact of giving of advance was declared in Balance Sheet of the Company. 8 Kirloskar Oil Engines Ltd. v. CCE 2004 (178) ELT 998 (Trib. - Mum.) Held that demand raised on the basis of information a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant holds tm money and pays the consideration to the service provider at the end of the stay and in case of any balance, he would refund the same to the Pilgrims The payment is made on behalf of the pilgrim and the applicant does not hold any title to the services so procured and supplied and hence acts as a "pure agent" of the recipient of supply, only if the supplies procured by the applicant from the third party are in addition to the services he supplies on his own account. Without prejudice to above it is a so submitted that the appellant also quality as a 'pure agent'. All the conditions of Rule 33 are duly complied with as under Sr.No. Conditions Remarks 1 The supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient. The required loan of electricity is taken as per rent agreement executed between the parties and therefore the rent agreement is an authorisation agreement whereby tenant authorises landlord to pay its portion electricity bill on its behalf. 2 The payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses? B. PERSONAL HEARING In the matter personal hearing was granted to the applicant on 03.09.2021 at Room no. 2.11 NCRB, Statue Circle, Jaipur. Sh. Akash Phophalia (CA), Authorised Representative of applicant appeared for PH. During the PH, he reiterated the submissions already made in the written application. He also made additional submission during the PH. C. COMMENTS OF THE JURISDICTIONAL OFFICER Comments received from the Assistant Commissioner, Ward-III, Circle-E, State Tax, Jodhpur vide letter dated 28.06.2021 are as under: - S. NO POINT ON WHICH ADVANCE RULING IS SOUGHT FOR COMMENTS 1. Whether reimbursement of electricity expenses, on actual basis, by the lessee to lessor would form a part of taxable value? Going through the facts, records and documents submitted by the applicant following facts are there- 1) Principal supply of services by the lessor is "renting of immovable property", 2) Electricity charges or incidental charges, maintenance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 997212). The applicant has not provided separate electric meter to the lessee in the instant case and as such the lessee cannot make the payment of electric charges directly to the electric company. In such circumstances the applicant makes the payment to the electric company and in-turn collects such charges from the lessee. To make the system work, the applicant has installed sub-meters and they collect the charges of the electric power used by the lessee as per the usage of power ascertained from such sub-meter. 3) As per rent agreement, the applicant had charged Rent, Maintenance charges, Interest, Security Deposit, JVVNL Electricity charges and DG electricity charges from tenant (Lessee). The applicant received advance in this regard from the lessee and made adjustment thereof in upcoming months/periods. 4) Before we delve deep to decide the case, it would be proper in the fitment of justice to discuss the relevant provisions of the statute which are as under- Section 7 of the CGST Act, 2017 Scope of supply:- (1) For the purposes of this Act, the expression-supply includes,- (a) all forms of supply of goods or services or both such as sale, transfer, bailer, exchang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (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; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation.- For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy. Rule 33 of the CGST Rules, 2017 Value of supply of services in case of pure agent - Notwithstanding anything contained in the provisions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Section 15 of the CGST Act, 2017. We find that the electricity expenses/charges related clause is mentioned in para 8(g) of the agreement. It reads that, ".........this is a prepaid meter, hence a computer generated invoice will be provided by the lessor to the Lessee as per actual unit cost with the other electrical related expenses and taxes" From this it is clear that the payment regarding the electricity expenses is collected by the Lessor by issuing invoice for the same. Hence, there is a established fact that supply of service has been made to the lessee for consideration by issuing invoice(s). 6) The facts submitted by the applicant (here Lessor) also state that the Lessor is also providing Services of DG set on Fixed rate of Rs. 10000/- per month and Rs. 18/- per unit for each unit consumed. This service is also an ancillary service of principal supply of services 'renting of immovable property (SAC Codes- 997212) and covers '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' as per clause (c) subsection (2) of section 15 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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