TaxTMI 
TaxTMI 
2026 (9) TMI 529
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.... the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like manner except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the above, henceforth, for the purposes of these proceedings, the expression "GST Act" would mean both the CGST Act and the WBGST Act. 1.2 The applicant, M/s DH Maintenance Limited, is engaged in providing common area maintenance and facility management services in respect of a commercial building known as "Harinath Heritage" situated at 16, Strand Road, Kolkata, West Bengal. The applicant also pays electricity charges to the electricity distribution company, CESC Limited, in respect of electricity consumed in the commercial building and proposes to recover the actual electricity charges from the respective unit holders based on their individual consumption towards HVAC and non-HVAC usage, along ....
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....uch maintenance activity, is also engaged in paying electricity charges to the electricity distribution company, namely CESC Limited, and recovering the same from the respective unit holders. The Applicant proposes to recover the electricity charges from the unit holders strictly on the basis of the actual electricity charges incurred by it, without adding any profit element or markup. The Applicant submits that the proposed mechanism is in accordance with Circular No. 206/18/2023-GST dated 31.10.2023 issued by the Ministry of Finance, Department of Revenue, Tax Research Unit, which provides clarification regarding the applicability of GST on reimbursement of electricity charges received by real estate companies, malls, airport operators etc. from their lessees or occupants. 2.3 The Applicant places reliance on Circular No. 206/18/2023-GST dated 31.10.2023, wherein clarification has been issued regarding the applicability of GST on reimbursement of electricity charges by real estate companies, malls, airport operators etc. from their lessees or occupants. The Applicant submits that, as clarified in the said Circular, where electricity is being supplied bundled with renting of im....
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....n area electricity consumption would be distributed among the unit holders based on the super-built-up area of their respective units and recovered from them at actuals. The total billable super-built-up area of the commercial building is 3,98,099 square feet. 2.7 The Applicant submits that the proposed recovery mechanism is based entirely on actual electricity consumption and the actual amount charged by CESC Limited. The Applicant has specifically demonstrated the working of the proposed mechanism with reference to the January 2026 electricity bill. The total CESC bill was INR 20,19,811/-. Electricity consumption other than HVAC was calculated at INR 10,24,267/-, electricity consumption towards HVAC was calculated at INR 6,34,700/- and the balance amount recoverable towards common area consumption was INR 3,60,844/-. The Applicant submits that the recovery of the aforesaid amount does not involve any profit or additional consideration in the hands of the Applicant. 2.8 The Applicant submits that, in view of the aforesaid mechanism, it would be deemed to be acting as a pure agent in respect of the electricity supply. The Applicant is merely making payment to CESC Limited and....
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.... profit element. The Applicant submits that the reimbursement of electricity charges as a pure agent should consequently be excluded from the value of the Applicant's maintenance service for the purpose of payment of GST. 2.12 Without prejudice to the above submissions, the Applicant submits that electricity/electrical energy itself possesses the characteristics of goods. The Applicant draws attention to the relevant provisions of the Electricity Act, 2003 and the Customs Tariff Act, 1975. Electricity is covered under the definition of "goods" under the relevant statutory framework and is classified under Chapter Heading 2716 of the Customs Tariff. The Applicant further submits that the erstwhile Central Excise Tariff also incorporated electrical energy under Heading 27160000 as a product classifiable as a good. The West Bengal Value Added Tax Act, 2003 also classified "Electricity" as a good under Schedule A under Entry No. 13. The Applicant submits that the nature of electricity as goods is therefore recognised under various statutory enactments. 2.13 The Applicant further refers to the definition of "electricity" under Section 2(23) of the Electricity Act, 2003, under ....
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.... recovers the actual corresponding amount from the respective unit holders. Thus, the Applicant acts as an intermediary or pure agent for the limited purpose of making payment of electricity charges on behalf of the unit holders. There is no element of profit, markup or additional consideration in the proposed recovery. 2.18 The Applicant further submits that the electricity consumption in the commercial building is capable of being separately identified under three broad categories, namely, electricity consumption other than HVAC in individual offices, electricity consumption specifically towards HVAC in individual offices and common area electricity consumption. The Applicant proposes to recover the electricity charges attributable to individual offices based on the actual per-unit rate charged by CESC Limited, while the balance amount attributable to common area consumption is proposed to be apportioned among the unit holders on the basis of the super-built-up area of their respective units. 2.19 The Applicant submits that the proposed reimbursement mechanism therefore satisfies the essential requirement that the amount recovered from the recipients corresponds to the amou....
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.... electricity charges from its lessees or occupants on an actual basis, without any difference between the amount recovered from the lessees or occupants and the amount charged by the State Electricity Boards or DISCOMs. Accordingly, the electricity charges so recovered would not form part of the value of supply made by the Applicant. However, if any value is added by the Applicant in the process of recovery of electricity charges, such value would form part of the composite supply and would be taxable accordingly in terms of the relevant provisions referred to in the said Circular. 4. Observations & Findings of the Authority 4.1 We have gone through the records of the issue as well as submissions made by the authorized representatives of the applicant during personal hearing. We have also considered the submission made by the concerned revenue officer. 4.2 As per the facts submitted before us, the applicant is exclusively engaged in providing common area maintenance, facility management and allied services in respect of a commercial building by the name of Diamond Heritage. It also pays electricity charges to the electricity distribution company (here Calcutta Electric Sup....
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....of electricity in the following manner: • Reimbursement at the unit rate of electricity being charged by CESC for consumption of electricity other than HVAC. • Reimbursement at the unit rate of electricity being charged by CESC for consumption of electricity specifically for HVAC. • For common area consumption, the amount recoverable would be the amount payable to CESC against the total electricity consumption for a month, reduced by the amount already recovered under the above two heads. The balance amount, being common area consumption, would be divided among all unit holders based on the super-built area of their individual units. 4.5 The applicant has referred to the Circular No. 206/18/2023-GST dated 31.10.2023 issued by Ministry of Finance, Department of Revenue (Tax Research Unit). The relevant portion of the circular which has been reproduced by the applicant is as under: 3. Whether GST is applicable on reimbursement of electricity charges received by real estate companies, malls, airport operators etc. from their lessees/occupants. 3.1 Doubts were raised on the applicability of GST on supply of electricity by the ....
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.... Boards or DISCOMs from them. They will be deemed to be acting as pure agent for this supply." In the instant case, as the applicant charges for electricity on actual basis that is, they charge the same amount for electricity from their lessees or occupants, as charged on them by the State Electricity Boards or DISCOMs, and since there is no difference in the amount being so collected by the applicant from the lessees or occupants and the amount charged on the applicant by the State Electricity Boards or DISCOMs, then it will not form part of value of supply of the applicant. However, in case there is any value being added in the entire process, it would form a part of composite supply and shall be taxed accordingly, pursuant to the relevant point no. 3.2 of the said Circular b) Later on, it has been informed by the jurisdictional authority that the issue raised in the present application has already been the subject matter of several adjudication proceedings in respect of the applicant. In adjudication cases bearing no. AD190625009367U and AD1906250170729 for the periods 2018-19 and 2019-20, the proceedings have been completed, and the issues in both cases have been the s....
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.... Heading 9969) is taxable @ 18%.; ii. In terms of Sl.25 of Notification 12/2017-Central Tax(Rate) dated 28/06/2017 and pari-materia State Notification issued in this regard, "Transmission or distribution of electricity by an electricity transmission or distribution utility" (under Heading 9969) is exempt from levy of GST; iii. In terms of para 2(z) of the Sl.25 of Notification 12/2017-Central Tax (Rate) dated iv. 28/06/2017 and pari-materia State Notification issued in this regard "electricity transmission or distribution utility" means" the Central Electricity Authority; a State Electricity Board; the Central Transmission Utility or a State Transmission Utility notified under the Electricity Act, 2003 (36 of 2003); or a distribution or transmission licensee under the said Act, or any other entity entrusted with such function by the Central Government or, as the case may be, the State Government;" The plain reading of such provision of law suggests that, for an electricity transmission or distribution utility like CESC Limited, subsequent transmission or distribution of electricity by taxpayer to its licensees/tenants is exempt from GST (like, tr....
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.... by the Revenue. The subject matter of the application and the adjudication proceeding as referred may appear to be the same at first glance. However, the questions raised in the application for advance ruling are based on the applicant's proposed billing pattern. The adjudication proceeding done by the Revenue is based on the existing billing pattern at the material point in time. During the personal hearing, clarification was sought from the applicant's representative regarding the existing and proposed billing pattern. The details submitted before us can be summarised as under: As per the existing billing pattern, the applicant has been issuing three bills to a particular unit holder. The first bill is charged for electricity consumption in the unit holder's office premises, other than HVAC, based on readings from the sub-meter. The applicant also charges transmission and distribution loss at 5% on the consumed units, in addition to actual consumption. The second bill is for electricity consumption in the unit holder's office premises for HVAC, based on sub-meter readings. The third bill is issued for maintenance, including electricity for common areas an....
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.... execute and carry on maintenance, management, administration of common portions/ services/ facilities and other allied works of the building which inter alia includes electrical systems and connections. The same clause also defines that the main purpose of the company is to take necessary steps for common purposes, including the purpose of maintaining and managing premises, rendition of services in common and collection of revenue and disbursement of common expenses. There is hardly any doubt that supply of electricity is an integral part of maintenance and management services provided by the applicant. It is true that in the proposed billing pattern the applicant has separated four kinds of supply and thereby tried to alienate CAM from electricity charges. But here we should concentrate more on the content of the issue, not the form. The applicant's activity is maintenance of premises and supply of electricity is an ancillary supply bundled with the principal supply of maintenance service. Clause 3.2 of the circular ibid has clearly stated, in the like cases even if electricity is billed separately, the supplies will constitute a composite supply. 4.9 The applicant has argued ....
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.... from the recipient of the main supply. The relationship between them is that of a provider of service and a recipient of service in respect of the main service, on a principal-to-principal basis. On the other hand, their relationship in respect of other ancillary services is that of a pure agent. Now we will look at the concept from the perspective of the GST laws. Section 2(5) of the CGST Act, 2017 defines an 'Agent' as a person including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another. We find the reference to the term 'Pure Agent' in explanation to Rule 33 of the CGST Rules, 2017. The relevant rule is reproduced as under: 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 p....
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....cant will act as their pure agent to incur expenditure or cost in the course of supply of service by the applicant. When asked on this point, the applicant's representative gives an additional submission and produces a specimen agreement in this respect, which will be made with the individual unit owner. As per the terms of the specimen agreement produced before us, the applicant is authorised to act as a pure agent of the service recipient (here, the unit owner) when he makes payment to DISCOM or any other electricity supplier for the share of electricity on behalf of the service recipient. The applicant is supposed to provide maintenance, management, administration of common portions/services/facilities, and other allied works of the building, which inter alia includes electrical systems and connections. Supply of electricity is undoubtedly a part of the entire service. Accordingly, the applicant is using the service of providing electricity as part of the whole set of services he is supposed to provide to the unit holders. In our considered view, the applicant fails the test of a pure agent. 4.12 Now we will consider the explanation provided in the second sentence of clause 3....