The West Bengal Authority of Advance Ruling (AAR) has ruled that goods and service tax (GST) is not payable on reimbursement of electricity charges on actual basis.
The bench of Dr Tanisha Dutta and Joyjit Banik has observed that the applicant will be deemed to be acting as pure agent in regard to supply of electricity to its sub-lessee and the reimbursement amount shall not be a part of his value of supply.
The applicant, Mega Flex Plastics Ltd. has taken a land on lease situated in the ‘Howrah Poly Park’ for a period of 99 years by a Deed of Lease executed with the West Bengal Industrial Development Corporation Limited (WBIDC) with a right to transfer or mortgage or assign its leasehold interest.
The applicant has developed the land and has constructed a factory building & warehouse over the said land. The applicant has let out a warehouse space vide a deed of Sub- Lease to White Saffron Grains LLP (sub-lessee) for a period of ten years commencing from April 1, 2022 for putting up a manufacturing unit against a lease rent payable monthly by the Sub-Lessee to the applicant.
The applicant, in addition to the lease rent mentioned above, is also entitled to reimbursement for electricity charges on an actual basis as specified in the agreement.
The applicant sought the advance ruling on the issue whether GST is liable to be paid on reimbursement of electricity charges on actual basis.
The applicant contended that reimbursement of expenses of electricity charges should not be a part of consideration since the applicant is acting here as a pure agent. As per para (a) of explanation of rule 33, “pure agent” is a person who “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”.
The AAR has held that the applicant is not liable to pay GST on reimbursement of electricity charges on actual basis.
Ruling Details
Applicant Name: Mega Flex Plastics Ltd
Date: 27/02/2025
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