The Gujarat Authority of Advance Ruling (AAR) ruled that GST applicable on electricity charges collected from govt. not covered under Incidental expenses, and as such would not be includible in the value of supply.
The applicant, M/s. Gujarat Narmada Valley Fertilizers & Chemicals Ltd. has entered into a lease agreement with the President of India acting through the Commissioner of Central Excise, Audit-I, Ahmedabad to provide along with the building for a rent the interior infrastructure like partitions, cabins, work stations, electrical air conditioners, fire safety systems, tables, chairs etc. at agreed monthly rent.
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 June 30, 2017.
However, CGST department has stopped paying GST component on electricity and incidental charges from July 1, 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 are also paying GST to respective governments.
The applicant sought the Advance Rulings on the issue as to 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 and recover GST from tenant on electricity or incidental charges charged by it.
The other issue was electricity charges paid by the landlord to Torrent Power Ltd. 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.
The coram consisting of Sanjay Saxena and Mohit Agarwal held that the electricity charges collected by the applicant is not covered under the provisions of Section 15(2)(c) of the CGST Act, 2017 and as such would not be includible in the value of supply.
The AAR ruled that the electricity charges collected by the landlord from the Govt. of India at actuals based on the reading of the sub-meters is covered under the amount recovered as a pure agent in terms of the provisions of Rule 33 of the CGST Rules, 2017 in respect of the lessor viz. Govt. of India.
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