TaxTMI 
TaxTMI 
2022 (2) TMI 994
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....rdarpura, JODHPUR- 342003, Rajasthan, - (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2)(e) given as under: - (e) determination of the liability to pay tax on any goods or services or both; SUBMISSION AND INTERPRETATION OF THE APPLICANT; (1) That the appellant (hereinafter referred as "appellant" or "applicant" or "lessor", or "landlord") is a registered assessee under GST laws having GSTN - 08ACEPM8844J1X4. (2) That the appellant had undertaken construction of its building and decided to give different floors or offices of its building on rent or lease. (3) That the appellant had entered into an agreement with its tenant and the copy of the rent agreement is attached herewith for your ready reference. (4) That in accordance with the said rent agreement appellant had given 5,437 sq feet (3,526 sq ft on 7th floor and 1,911 sq ft on 6th floor) at its premises "Shanti One", Plot No 39, 11th A Road, Bachraj ji ka Bagh, jodhpur-342003 (Rajasthan) hereinafter referred as "the said premises", to the tenant on lease for a period 9 years and 11 months divided in 9 terms of 1 year each and 1 term of 11 months. ....
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.... charges reimbursed by tenant Q=Z*P For your ready reference we are attaching the sample electricity bill and the manner of reimbursement of electricity charges by tenant. (The copy of the said electricity bilI is also attached herewith) S.No. Details Bill Amount (Rs.) 1 Electricity Charge 36,214.20 2 Fixed Charge 20,250.00 3 Demand Surcharge 4 Power Factor Surcharge (+) Incentive (-) /Shunt capacitor (3%) 108.64 5 Unauthorized Consumption Amount 6 CT/PT/Meter Rent 7 Transformer Rent 8 Other 52.29 9 Rebates (-) (i) Voltage (ii) Solar/Sprinkler/Rural Rebate/Pre-Paid Meter Rebate 10 Total Nigam Dues(Sum of 1 to 9) 56,625.13 11 Electricity Duty 1,636.80 12 Water Conservation Cess 409.20 13 Urban Cess 613.80 14 Other Nigam Dues -548.95 15 Other Electricity Dues 16 Other Water Conservation Cess 17 Other Urban Cess ; 18 Other LED/Deferred Deposit 19 Adjusted Amount (Code) 20 Total Due Date Amount (Sum of 10 to 19) 58,735.98 ....
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....s purely a reimbursable expense made by the lessee which is collected on actual usage of the electric power. Secondly, if at all the amount was not be charged on actual usage basis, it would have been all the more easier for both the parties to fix a certain amount towards electricity charges in the agreement itself. However, this has not been done which clarifies the intent of both the parties that the charges towards electric power usage would be on actual basis however, Due to lack of infrastructure on the part of the lessor, there is a silent agreement between both the parties that the applicant will collect the actual usage charges on the basis of the reading of the sub-meter and in-turn pay the same to the electric company. Point on which advance ruling is sought for - The question/issue before you for determination is - (a) Whether reimbursement of electricity expenses, on actual basis, by the lessee to lessor would form part of taxable value? (b) If the answer to above is no. whether GST is levied on the reimbursement of expenses from the lessee by the lessor at actuals? (c) If answer to the above is yes, what is the rate of GST applicabl....
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................................................................................................................. ............................................................................................................." (C) Rule 33. Value of supply of services in case of pure agent.- Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,- (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient; (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation.- For the purposes of this rule, the expression "pure agent" means a pers....
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....ded rulings some of which are stated hereunder:- Sr.No. Relevant Case Law Decision 1 Gujarat Narmada Valley Fertilizers and Chemicals Ltd [2020] 28 Taxlok.com 124(AAR-Gujarat) 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 accordingly it will not be includible in the value of supply. 2 Scott Wilson Kirkpatrick (l.) (P.) Ltd. v. CST [2006] 4 STT 285 (Bane. CESTAT) Held, reimbursements of expenses are not subject of service tax. 3 B.S. Refrigeration Ltd. V. CST [2006] 3 STT 69 (Bang. CESTAT) Held, demand of Service Tax on entire amount reimbursed not sustainable. 4 Glaxo Smithkline Pharmaceuticals Ltd.v.CCE 2005 (188) ELT 171/1 STT 37 (Mum. - CESTAT). Held, Service Tax not leviable on expenses recovered. 5 Malabar Management Services (P.) Ltd. v. GST [2008] 14 STT 107 (Chennai- CESTAT) Held, amount received as reimbursement of staff salaries and infrastructural expenses not includible in value of taxable services. 6 Basti Sugar Mills C....
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....of 14.22 crores, which has been actually received by the petitioner from its clients towards reimbursement of expenses, could not be the subject matter of service tax. 12 Arivu Educational Consultants Pvt. Ltd [2019] 16 TAXLOK.COM 124 (AAR-Karnataka) Where the applicant collects the exact amount and remit the same to the respective institute without any profit element or additions such type of services are covered under Rule 33 of CGST Rules 2017 13 Acharya Shree Mahashraman Chaturmas Pravas vyavastha Samiti Trust [2019] 16 TAXLOK.COM 165 (AAR-Karnataka) The applicant collects the advance for booking of rooms on behalf of pilgrims from outside The State and acts as an agent of die pilgrims The applicant holds tm money and pays the consideration to the service provider at the end of the stay and in case of any balance, he would refund the same to the Pilgrims The payment is made on behalf of the pilgrim and the applicant does not hold any title to the services so procured and supplied and hence acts as a "pure agent" of the recipient of supply, only if the supplies procured by the applicant from the third party are in addition to the services he supplies on his own....
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....ot chargeable to GST. However, the appellant seeks clarity on the issues raised as to whether electricity expenses shall form part of taxable value based on the nature of services provided or whether reimbursement of electricity expenses is chargeable to GST. Applicant attached copy of Rent Agreement and Sample Electricity Bill in support to their submission. A. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT (a) Whether reimbursement of electricity expenses, on actual basis, by the lessee to lessor would form part of taxable value? (b) If the answer to above is no, whether GST is levied on the reimbursement of expenses from the lessee by the lessor at actuals? (c) If answer to the above is yes, what is the rate of GST applicable to said reimbursement of expenses? B. PERSONAL HEARING In the matter personal hearing was granted to the applicant on 03.09.2021 at Room no. 2.11 NCRB, Statue Circle, Jaipur. Sh. Akash Phophalia (CA), Authorised Representative of applicant appeared for PH. During the PH, he reiterated the submissions already made in the written application. He also made additional submission during the PH. C. COMMENTS OF THE JURISD....
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....om the lessee by the lessor at actuals? See above 3. If the answer to above is yes, what is the rate of GST applicable to said reimbursement of expenses? Since the principal supply provided by the applicant (here Lessor) is of Renting & Leasing Of Immovable Property (sac codes- 997212), it will attract GST @ of 18% (SGST-9%, CGST-9%) of the taxable value of supply. D. FINDINGS, ANALYSIS & CONCLUSION: 1) We have gone through the facts of the case, submission made by the applicant at the time of preliminary hearing. 2) We observe that applicant had entered in a rent agreement with its tenant (Lessee) and had given 6th & 7th floor of its building at premises "Shanti One", Plot No 39, 11th A Road, Bachraj ji ka Bagh, Jodhpur-342003 on lease to lessee. Applicant is supplier of Renting & Leasing of Immovable Property (sac codes- 997212). The applicant has not provided separate electric meter to the lessee in the instant case and as such the lessee cannot make the payment of electric charges directly to the electric company. In such circumstances the applicant makes the payment to the electric company and in-turn collects such charges from the lessee. To make the syst....
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.... The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. Section 15 of the CGST Act, 2017 Value of Taxable supply.- (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include,- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount ....
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....nt incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. Illustration.- Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A's recovery of such expenses is a disbursement and not part of the value of supply made by A to B. 5). In view of above legal provisions and fact of the case, we observe that Principal supply of services by the lessor is "renting of immovable property". Electricity charges or incidental charges, maintenance charges are in relation to composite supply of principal service of renting of immovable property, any incidental charges or expenses in respect of supply of service shad form part of value of taxable supply in terms of clear provisions of Section 15 of the CGST Act, 2017. We f....