• Notification Date: 21-12-2021
• Notification No: 89/2021-22

GST payable on Electricity Charges and Water Charges as per meter reading and collected from Recipients on Reimbursement basis: AAR

The Maharashtra Authority of Advance Ruling (AAR) held that GST payable on electricity charges and Water charges as per meter reading and collected from the recipients was actual on a reimbursement basis.

The applicant, M/s. Indiana Engineering Works (Bombay) P. Ltd. has entered into a Leave and License Agreements dated 12.06.2017 with M/s. Capri Global Capital Ltd (“Licensee’), the Applicant has licensed the 4th floor of the Indiana House for use and occupation of the leased premises on an agreed license fee payable monthly with Service tax or GST.

The applicant has sought the advance ruling on the issue of whether Electricity charges and Water charges paid by the Applicant as per meter reading and collected from the recipients at actual on reimbursement basis are liable to GST and whether the Appellant acts as a Pure Agent. The AAR has noted that the main electric meter is in the name of the Applicant: the service is not acquired from the main supplier of electricity on the instructions from the tenant and thus the applicant does not act as a pure agent of the tenant in this respect. Even after the tenant leaves the premises, the main electric (or main water) meter is going to remain in the name of the Applicant.

The supply under the main meter is not due to instructions from any particular tenant. With regards to a ‘pure agent’, the applicant contends that the reimbursement of expenses, such as electricity charges, water supply charges etc. incurred by it and received from the lessee is towards payment to the third-party suppliers. In the present case, the applicant has got the main electric connection in its own name and has created different sub connections at each location to know the actual consumption of electricity and water charges by the tenants which are to be apportioned/recovered from them as per floor space occupied.

All these activities show that these supplies are on the applicant’s own account and is for the effective enjoyment of premises. The applicant procures those services from various agencies and it is the primary responsibility of the applicant to pay to those agencies for the supply of said services at the initial or first stage. The Coram of Rajiv Magoo and T.R. Ramnani ruled that renting of immovable property would be the main supply and the provision of other utilities such as electricity, and water supply, fuel etc. would be in the nature of ancillary supply which helps in better enjoyment of the main supply.

Therefore, the utility charges in the nature of electricity charges and water reimbursed to the applicant by the tenant form a part of the value of supply.