Landlord exempt from GST on electricity charges separate from rent.

The ruling authority determined that the landlord is not liable to pay GST on electricity charges as they are considered independent of the rent and not includible in the value of supply under Section 15 of the CGST Act, 2017. Additionally, the landlord's collection of electricity charges from tenants based on sub-meter readings was considered as amounts recovered as a pure agent under Rule 33 of the CGST Rules, 2017.

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Issues Involved:
1. Liability of landlord to pay and recover GST on electricity or incidental charges in addition to rent.
2. Consideration of electricity charges paid by the landlord and recovered from tenants as amounts recovered as a pure agent.

Issue-wise Detailed Analysis:

1. Liability of landlord to pay and recover GST on electricity or incidental charges in addition to rent:

The applicant, M/s. Gujarat Narmada Valley Fertilizers & Chemicals Ltd. (GNFC), entered into a lease agreement with the President of India for renting immovable property and providing interior infrastructure. The applicant charged GST on the total rent, including electricity charges, until 30.06.2017. However, from 01.07.2017, the CGST department stopped paying GST on electricity charges, citing Rule 33 of the CGST Rules, 2017.

The applicant argued that electricity charges are incidental expenses related to the principal service of renting immovable property and should form part of the taxable supply value under Section 15 of the CGST Act, 2017. The applicant sought an advance ruling on whether they are liable to pay and recover GST on electricity charges in addition to rent.

The ruling authority noted that the agreement specified a fixed rent amount of Rs. 20,80,848/- per month, which included internal infrastructure but did not mention electricity charges. Clause 9 of the agreement mandated that the Govt. of India pay electricity charges directly to the concerned supplier. The ruling concluded that electricity charges are independent of the rent and are not includible in the value of supply under Section 15(2)(c) of the CGST Act, 2017. Therefore, the landlord is not liable to pay GST on electricity charges.

2. Consideration of electricity charges paid by the landlord and recovered from tenants as amounts recovered as a pure agent:

The applicant paid electricity charges to Torrent Power Ltd. and recovered them from tenants based on sub-meter readings. The applicant argued that they were not acting as a pure agent since the electricity bill was in their name, and there was no formal authorization to act as a pure agent.

The ruling authority examined the agreement and noted that the lessee (Govt. of India) was supposed to pay electricity charges directly to the electric company. However, due to the absence of a separate electric meter, the applicant installed sub-meters and collected charges based on actual usage. The ruling concluded that the applicant acted as a pure agent, collecting reimbursable expenses for electricity charges based on actual usage. The conditions of Rule 33 of the CGST Rules, 2017, were satisfied, and the electricity charges were considered amounts recovered as a pure agent.

Ruling:

1. The electricity charges collected by the applicant are not covered under the provisions of Sec. 15(2)(c) of the CGST Act, 2017, and are not includible in the value of supply.
2. The electricity charges collected by the landlord from the Govt. of India based on sub-meter readings are covered as amounts recovered as a pure agent under Rule 33 of the CGST Rules, 2017.

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