GST on recovery of electricity charges under lease and PPA

[Hithik]

Dear Experts,

Mr. B having onsite solar power purchase agreement with Mr. A wherein Mr. A has installed & owns solar & metering connection on the premises of Mr. B. further, Mr. B has leased out the said premised to Mr. C, Mr. A issues bill of supply to Mr. B say 15 Rs per unit for solar units consumed by Mr. C (being supply of electrical energy, no GST is charged by Mr. A to Mr. B), further Mr. B issues Tax Invoice to Mr. C for Rent and a separate bill for electricity units consumed at 18 per unit (i.e., including a markup over the rate charged by Mr. A)

Query:

1. In the above facts, where say no separate PPA or electricity supply agreement exists between Mr. B and Mr. C, whether the recovery of electricity charges by Mr. B would it be regarded as part of the composite supply of lease agreement and therefore would attract GST along with rent or continue to qualify as an exempt supply of electrical energy?

2. Further, if a separate PPA/electricity supply agreement exists between Mr. B and Mr. C, under which electricity is billed separately, would such supply qualify as an exempt supply of electrical energy under GST, notwithstanding that Mr. B procures the electricity from Mr. A and is not orignator and recovers it from Mr. C?

3. Alternatively, if Mr. B merely recovers the exact amount charged by Mr. A (i.e., 10 per unit without any markup) from Mr. C, similar to reimbursement of electricity charges commonly seen in commercial lease agreements wherein landlord recovers from tenant as charged by DISCOMS, can Mr. B be regarded as acting as a pure agent which would be excluded from the value of supply?

Please share your opinions.

Thank you in advance!!

AI Summary

Electricity charge recovery under leases raises questions of composite supply, exempt onward supply, and pure-agent valuation treatment. GST treatment of electricity-charge recovery under a lease arrangement depends on whether the recovery is part of a composite lease supply or an exempt supply of electrical energy. The issues include separately billed electricity under a distinct power purchase or supply agreement, despite onward procurement from a solar supplier, and whether exact, no-markup recovery may be excluded from the value of lease supply where the premises owner acts as a pure agent.