TMI Blog2022 (10) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... No.48/2022 - - - Dated:- 14-7-2022 - SRI B. RAGHU KIRAN, IRS, AND SRI S.V. KASI VISWESWARA RAO, MEMBER Sub: Referring application to Appellate Authority for Advance Ruling in terms of Section 98(5) of TGST Act, 2017 for hearing and decision Reg. ********** M/s. Duet India Hotels (Hyderabad) Private Limited, Sy No.27/1 TO 27/4, Adjacent To Dell, Nanakramguda, Serilingampally, Hyderabad, Telangana, 500 017 (36AADCD1031G2Z7) has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules, seeking Advance Ruling on the following as under : 1. Whether GST is applicable on electricity and water charges which are being collected at actual by the Lessor from the Lessee? 2. If answer to Q.No.1 is yes, then what is the nature of supply and applicable rate of GST? I. Statement of relevant facts submitted by the applicant having a bearing on the question(s) raised: 1. Ms. Duet India Hotels (Hyderabad) Private Limited ( Applicant/Lessor ) is engaged in the business of running hotels. The Lessor is the owner of Holiday Inn - Express Suits Hyderabad ( the Hotel ). The hotel is managed by the Intercontinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CGST Act; c. Determination of time and value of supply of goods or services or both; d. Admissibility of input tax credit of tax paid or deemed to have been paid; e. Determination of the liability to pay tax on any goods or services or both; f. Whether applicant is required to be registered; g. Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. 8. The lessor submits that issue on which advance ruling is sought in the instant matter relates to determination of the liability to pay tax on collection of electricity and water charges at actuals. 9. The question relating to determination of the liability to pay tax on electricity and water charges is eligible to be posed for advance ruling before the Advance Ruling Authority in terms of Section 97(2)(e) of the CGST Act. Hence, present advance ruling application is maintainable before the Hon'ble Authority for Advance Ruling, Telangana. ISSUES REQUIRING ADVANCE RULING: 10. The applicant submits the following questions for Advance Ruling and their inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is ancillary; 16. Mixed Supply Section 2(74) of the CGST Act, mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. 17. Section 8 of the CGST Act: 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. 18. Value of taxable supply - Section 15 of the CGST Act: (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount received for supply he provides on his own account. Notification No. 2/2017-Central (Rate) dated 28.06.2017 20. Notification No. 2/2017 - Central Tax (Rate) dated 28.06.2017 provides the list of exempted intra state supply of goods. Similar notification has been issued under the Telangana State GST Act, 2017 vide Notification No. 2/2017 State Tax (Rate) dated 29.06.2017. 21. The relevant entries under the above referred Notification have been reproduced below: Sl.No. Chapter, Section or Heading Description of Goods (1) (2) (3) 99. 2201 Water [other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container] 104. 2716 00 00 Electrical energy 22. In the present case, an agreement has been entered between the lessor and lessee. As per the terms of the agreement, the lessor has allowed the lessee to use the licensed premises against the payment of a mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y if the supplier satisfies all the conditions prescribed in the said rule. 30. In the present case, the agreement entered by the lessee with the lessor is towards receipt of renting/leasing of immovable property service, for which lessee is paying license fee as a consideration on monthly basis. Further, the lessor is also discharging applicable GST on the license fee received. As per the terms of the agreement, lessee has to bear the electricity and water charges at actuals in respect of the electricity and water consumed by them for running the restaurant. Accordingly, lessee is paying the electricity and water charges to the lessor who in turn pays the same to concerned authorities as owner of the licensed premises. 31. Thus, the obligation to pay the electricity and water charges is on the lessee. However, lessor being the owner of the licensed premises is receiving electricity water bills in its name, paying to the concerned authorities and collecting the same from the lessee at actuals as an agent. 32. Thus, all the conditions prescribed under Rule 33 of the CGST Rules are satisfied which are as follows. i. The supplier enters into a contractual agreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he supply of renting of immovable property service. 33. Thus, the lessor has satisfied all the conditions prescribed under Rule 33 of the CGST Rules, in respect of pure agent. Accordingly, the lessee states that electricity and water expenses collected by the lessor are reimbursement of expenses which are incurred by the lessor as a pure agent of the lessee and contends that these are not incidental expenses for providing renting of immovable property service by the lessor. 34. Therefore, Section 15(2)(c) of the CGST Act would not apply in this case. Accordingly, the said expenses would not be includible in the value of supply of renting of immovable property service being provided by the lessor to the lessee. 35. In this connection, reliance is placed on the judgment given by the Hon ble tribunal in the case of M/s. Kiran Gems Private Ltd. Vs. CCE ST Surat -I. In this case, it was held that the electricity charges are supposed to be borne by the service recipient as per the terms of the lease agreement, therefore, merely facilitating the payment of electricity charges and subsequently taking the reimbursement of the same will not form part and parcel of gross val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Tax on the issues raised by the applicant are as given below. It is observed from clause 7 of Article 4 of the license agreement (furnished by the applicant along with application) between the applicant and his customer that the applicant in consideration of the licensor having granted the license to use the licensed premises as set out in the agreement, the licensee shall pay to the licensor a monthly fee as prescribed there under. Apart from the above, as per clause 25 of Article 9 of the agreement, electricity, air conditioning and water charges will be borne by the licensee as per the actual meter readings and rates for the licensed premises. The applicant in his application claimed that he falls under the definition of pure agent . Rule 33 of the CGST Rules, 2017 mandates that the following conditions need to be fullfilled by a supplier to qualify as pure agent. (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 agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and supply of electricity and water are Incidental. Thus, espousing the afore-said concept of composite supply to the facts of the present case, it can be decided that leasing of premises would be the main supply and provision of utilities such as electricity and water would be in the nature of incidental/ancillary supplies which are essential in enjoyment of the main supply. Further, in terms of Sec. 8 of the CGST Act, 2017, the tax liability on 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. Accordingly, in the instant case, GST is applicable on supply of electricity and water charges and the rate applicable to supply of leasing services is applicable to the supply of these utilities. In view of the above discussion, the questions raised by the applicant are clarified as below: Questions Ruling 3. Whether GST is applicable on electricity and water charges which are being collected at actual by the Lessor from the Lessee? Yes 4. If answer to Q.No.1 is yes, then what is the na ..... X X X X Extracts X X X X X X X X Extracts X X X X
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