FA, 2020 amendment increasing...
Fact of the Case
The applicant entered into a lease agreement with Govt. to provide a building on rent along with interior infrastructure (such as fittings, lightings etc.) for the use of the Dept of Central Excise.
Apart from charging rental, the applicant also charged proportionate electricity charges from the lessee based on sub-meter readings installed at lessee premises. In the above context, the applicant applied for Advance Ruling to determine whether they were liable to charge GST for such electricity charges.
In this regard, the Gujarat AAR observed that rental charges for the building and other infrastructure are fixed. Whereas electricity charges are to be borne by the lessee based on actual usage. The agreement specifically provides that the lessee will directly pay the electricity company rental. The applicant has cast an onus on the lessee to pay the charges for the electricity used directly to the power company.
It was held that the electricity charges would not be covered within the scope of ‘incidental expenses or any amount charged in respect of supply’ given under Section 15(2) of the CGST Act as it was not required to be incurred by the supplier.
The applicant has installed sub-meters to determine the actual usage of the electric power. The applicant is held to collect electricity charges based on actual use of electricity. The expenses are purely reimbursable and therefore not taxed by pure agent.
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