GST on recovery of electricity charges

[KARAN VERMA]

Sir

In my factory premises, i have let out space on rent to third party. I have charged GST @ 18% on rent charges. Along with rent, i am also recovered electricity expense on basis of units consumed by tenant and deposit electricity bill to Govt.

Whether I am liable to charge GST on reimbursement of electricity expenses.

[KASTURI SETHI]

In my view,it is not taxable. You have neither generated electricity nor supplied electricity.

[KASTURI SETHI]

Also see the definition of 'pure agent' under Valuation Rules.

[KARAN VERMA]

Sir

As per advance ruling, E square leisure pvt ltd, Maharashtra = 2019 (4) TMI 421 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, Gst is applicable on reimbursement of electricity expense along with rent.

Kindly see the ruling.

[KASTURI SETHI]

I have posted the same in some other case. In this case the applicant was generating electricity.

[KASTURI SETHI]

In AAR Maharashtra the party failed to prove its activity as pure agent.

[KARAN VERMA]

Thank you sir, for your prompt reply and response.

In Pure agent, there is one condition to show separately on Tax invoice.

We have not shown such amount separately on Tax invoice.

Electricity meter is name of company ABC and ABC has installed sub meter in premises of tenant. Tenant reimburse electricity expense amount to landlord. And landlord paid such amount to state electricity board.

[KASTURI SETHI]

Regarding the concept of 'Pure Agent' and its parameters also see reply against Issue ID 114807 dated 28.3.19.

[KARAN VERMA]

Sir

Electricity bill is name of landlord, whether reimbursement of such expense from tenant fulfill the condition of pure agent when no directly bill in the name of tenant.

[KASTURI SETHI]

You will have to go through the terms and conditions of the rent deed. You are intelligent and knowledgeable enough to arrive at correct decision on this issue.

[YAGAY andSUN]

In this matter the concept of Pure Agent will not come into purview as electricity is being consumed by the tenant.

AI Summary

GST on electricity reimbursements depends on pure agent status and invoice and lease documentation. Recovery of electricity charges from a tenant alongside rent depends on whether the landlord qualifies as a pure agent under the valuation rules, with key factual determinants being who holds the electricity bill/meter, whether pure agent conditions (including separate invoicing) are met, and what the lease terms provide; an advance ruling was cited where GST applied because pure agent status was not established.