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 recovery under commercial leases may constitute composite renting supply unless independently contracted or validly structured through pure-agent conditions.
Electricity charges recovered by a lessor may be treated as part of a composite supply of renting where electricity is incidental to use of leased premises, particularly where no separate electricity agreement exists or a markup is charged. Separate contracting, billing and dedicated metering may support an independent exempt supply of electrical energy, though this remains disputed where the lessor procures electricity onward. Recovery at actual cost does not automatically qualify for pure-agent treatment, which requires satisfaction of prescribed conditions and may be difficult where the lessor is the contractual recipient.