TMI Blog2022 (2) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... on 'Pure Agent' is concern, in the instant case there is no clear authorisation made by the lessee on which the supplier (lessor) acts as a pure agent of the recipient of the supply, when he makes the payment to the third party. The rent agreement itself not become an authorisation as nowhere in the said agreement has the 'reimbursement' term been mentioned. Further applicant (lessor) does not enter into a contractual agreement with the recipient (Lessee) of supply to act as pure agent to incur expenditure or costs in the course of supply services. Hence, the act of working as an 'pure agent' has not been phrased out. Thus, reimbursement of electricity expenses had not been made on actual basis, by the lessee to lessor as it had been collected in advance with rent and further adjusted by raising the invoice/bill/memo/document by the lessor. Therefore, in the instant case, the so called reimbursement of electricity expenses would form part of taxable value in term of clause (c) subsection (2) of section 15 of the CGST Act, 2017. In the instant case, the applicant had not acted as pure agent and invoice/bill/memo/document issued in relation to collect Ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (5) that the tenant needs to pay following amount in accordance with the rent agreement as attached herewith, the details of which is as under Nomenclature given by appellant Amount Respective clause of rent agreement Remarks Rent 2,07,000- 3,21.000/- per month Clause 3 of rent agreement The range shown in column 2 of this table is exclusive of GST. Maintenance charges ₹ 5 per sq ft or any other tax on rent Clause 3 of rent agreement Inclusive of GST Interest 18% p.a. from the 5th day of subsequent of month till the date of payment of rent Clause 4 of rent agreement It is payable only if tenant fails ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched 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 Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usage of power ascertained from such sub-meter. Two aspects emerge from the above scheme of arrangement - The applicant has not obtained separate meter from the electric company to facilitate the direct payment of electricity charges by the lessee to the electric company. This is due to practical impossibility in obtaining the separate meters from electricity department. - In absence of separate meter, the applicant has installed sub-meter and collects the charge of electric power used by the lessee from the lessee and in-tum pays the same to the electricity company. The above makes it amply clear that the lessee was supposed to pay the electricity charges directly to the electric company as per the actual usage in terms of the agreement. However, for the failure of the lessor to obtain a separate electric meter for the premises rented to the lessee, they have mutually agreed to collect the electric charges on the basis of actual usage based on the sub-meters and onward payment to the electric company. At this juncture, it is noteworthy to note that with a purpose to ensure such actual payment, the lessor i.e. the applicant has installed a sub-meter for the lessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation ,- For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;] (b) import of services for a consideration whether or not in the course or furtherance of business; and (c) the activities specified in Schedule I, made or agreed to be made without a consideration; (d) *** (B) Section 15. 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. .................................................. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e highlighted portion above, for any transaction to quality' as supply, there must be consideration charged by the supplier from the recipient. In absence of consideration being charged by the supplier any transaction cannot fall within the purview of supply and consequently out of the purview of levy of GST. (2) Reimbursement of expense is nothing but to repay certain expense incurred by the person on behalf of other person. (3) In accordance with Section 15 of CGST Act 2017 and Rule 33 of CGST Rules 2017 (relevant part of the base provision is stated above), reimbursement of expenses on cost to cost basis do not qualify for being addition in the value of supply. (E) Our View on the issues Since we are not charging anything over and above the cost of electricity therefore in absence of consideration and being a pure agent in terms of rule 33 of the CGST Rules 2017 such reimbursement of expenses can neither form part of taxable value nor can be chargeable to GST. In support of our view that reimbursement of expenses is not chargeable to tax there are decided rulings some of which are stated hereunder:- Sr.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company is a publicly available document and suppression of such information cannot be alleged. 10 [2009] 20 STT 431 (BANG. - CESTAT) Rolex Logistics (P.) Ltd. V Commissioner of Service Tax, Bangalore Section 67, read with section 73, of the Finance Act, 1994 -Valuation of taxable service -Revenue invoking extended period of limitation, demanded service tax from assessee under category of 'Management consultancy service' - Assessee challenged said demand on ground that reimbursements received by it were not taxable and suppression of facts could not be alleged against it -Whether reimbursements are not for services rendered and, therefore, Commissioner was not correct in holding that there was no provision for deductions on account of reimbursement and whatever gross amount was charged by service provider same was liable to service tax - Held, yes - Whether since show-cause notice was based on balance sheet and other documents, it could not be said that assessee had suppressed facts with an intention to evade payment of duty - Held, yes - Whether, therefore, longer period also could not be invoked - Held, ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the rent agreement is an authorisation agreement whereby tenant authorises landlord to pay its portion electricity bill on its behalf. 2 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. The landlord separately charges for electricity bill and in respect of the same it issues separate invoice/bill/memo/document by whatever name called. 3 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. This condition is also fulfilled by virtue of rent agreement attached herewith. 4 Enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both. Rent agreement is a contractual agreement. 5 Neither intends to hold nor holds any title to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. NO POINT ON WHICH ADVANCE RULING IS SOUGHT FOR COMMENTS 1. Whether reimbursement of electricity expenses, on actual basis, by the lessee to lessor would form a part of taxable value? Going through the facts, records and documents submitted by the applicant following facts are there- 1) Principal supply of services by the lessor is renting of immovable property , 2) 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 shall form part of value of taxable supply in terms of clear provisions of Section 15 of the CGST Act, 2017 3) We find that the electricity expenses/charges related clause is mentioned in para 8(g) of the agreement. It reads that, .............. this is a prepaid meter, hence a computer generated invoice will be provided by the lessor to the Lessee as per actual unit cost with the other electrical related expenses and taxes. From this it is clear that the payment regarding the electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-turn collects such charges from the lessee. To make the system work, the applicant has installed sub-meters and they collect the charges of the electric power used by the lessee as per the usage of power ascertained from such sub-meter. 3) As per rent agreement, the applicant had charged Rent, Maintenance charges, Interest, Security Deposit, JVVNL Electricity charges and DG electricity charges from tenant (Lessee). The applicant received advance in this regard from the lessee and made adjustment thereof in upcoming months/periods. 4) Before we delve deep to decide the case, it would be proper in the fitment of justice to discuss the relevant provisions of the statute which are as under- Section 7 of the CGST Act, 2017 Scope of supply:- (1) For the purposes of this Act, the expression-supply includes,- (a) all forms of supply of goods or services or both such as sale, transfer, bailer, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business;[and] (c) the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation .- For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy. Rule 33 of the CGST Rules, 2017 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 followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(g) of the agreement. It reads that, .........this is a prepaid meter, hence a computer generated invoice will be provided by the lessor to the Lessee as per actual unit cost with the other electrical related expenses and taxes From this it is clear that the payment regarding the electricity expenses is collected by the Lessor by issuing invoice for the same. Hence, there is a established fact that supply of service has been made to the lessee for consideration by issuing invoice(s). 6) The facts submitted by the applicant (here Lessor) also state that the Lessor is also providing Services of DG set on Fixed rate of ₹ 10000/- per month and ₹ 18/- per unit for each unit consumed. This service is also an ancillary service of principal supply of services 'renting of immovable property (SAC Codes- 997212) and covers 'any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services' as per clause (c) subsection (2) of section 15 of the CGST Act, 2017.' 7) As far as expression 'Pure Agent' is concern, in the instant case there i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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