GST applicability of Electricity Charges imposed by Sub-Lessor: AAR rejects Application filed by Non-Supplier [Read Order]

In a recent ruling by the Gujarat Authority for Advance Ruling (AAR), an application filed by Tasty Thrills LLP regarding the GST liability of electricity charges has been rejected. The applicant, operating a restaurant under the “RP Pizzeria” brand, sought clarification on the GST applicability of electricity charges imposed by the sub-lessor.

The appellant has taken a premises on sub-lease basis from Hardcastle Restaurants Pvt. Ltd.. The sub-lessor, is in the business of operating Quick Service Restaurant under the brand name “McDonald’s”. The appellant on the other hand as is already mentioned supra, is operating a restaurant under `RP’s Pizzeria” brand. The premises housing both these restaurants though visibly separate, have common electricity connection.

The applicant, from the beginning of their rent agreement has r his portion of electricity charges, based on sub-metre reading to the sub-lessor thereafter, pays the amount so collected from the applicant along with his share of the electricity charges, to the supplier of the electricity. Now, the sub-lessor is of the view that the electricity charges so collected are incidental charges to the rent & hence is liable for GST like other incidental charges.

The applicant however, is of the view that its portion of the charges paid to the sub-lessor in respect of electricity consumption is nothing but a reimbursement of expenses on actual basis; that the same has been deposited by the sub-lessor to the electricity supplier; that the sub-lessor has acted as a ‘pure agent’. The applicant has further stated that no incidental services were provided to them by the sub-lessor.

The applicant contended that the electricity charges were a reimbursement of actual expenses and that the sub-lessor acted as a ‘pure agent,’ with no incidental services provided. The applicant sought an advance ruling on whether the sub-lessor was liable to charge and pay GST on these electricity charges.

A Two-Member Bench of the Authority comprising Riddhesh Raval, Member SGST and Amit Kumar Mishra, Member CGST observed that “We find that [a] the applicant before us is not the supplier of the service and [b] that the ruling sought is not for admissibility of input tax credit in respect of supply received by the applicant. This being the factual matrix, we find that the applicant before us has no locus standi in seeking a ruling in the facts of the present case.”

To Read the full text of the Order CLICK HERE

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