No GST on Reimbursement of Electricity Charges when Collected at Actual Cost Basis: AAR [Read Order]
The AAR has ruled that no GST is applicable on the reimbursement of electricity charges when collected an actual cost basis, as the lessor qualifies as a pure agent under GST provisions
![No GST on Reimbursement of Electricity Charges when Collected at Actual Cost Basis: AAR [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/West-Bengal-Electricity-charge-GST-Exemption.jpg "No GST on Reimbursement of Electricity Charges when Collected at Actual Cost Basis: AAR [Read Order]")
The West Bengal Authority for Advance Ruling (AAR) ruled that no Goods and Services Tax (GST) is payable on the reimbursement of electricity charges when collected at an actual cost basis, as the applicant qualifies as a pure agent under Rule 33 of the CGST Rules, 2017. The applicant, Mega Flex Plastics Ltd, submitted that it has sub-leased a warehouse to White Saffron Grains LLP for...
The West Bengal Authority for Advance Ruling (AAR) ruled that no Goods and Services Tax (GST) is payable on the reimbursement of electricity charges when collected at an actual cost basis, as the applicant qualifies as a pure agent under Rule 33 of the CGST Rules, 2017.
The applicant, Mega Flex Plastics Ltd, submitted that it has sub-leased a warehouse to White Saffron Grains LLP for ten years, starting April 1, 2022. As per the lease agreement, in addition to the monthly lease rent, the sub-lessee reimburses electricity charges as per actual consumption, calculated using a formula based on West Bengal State Electricity Distribution Company Limited (WBSEDCL) billing.
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The applicant’s counsel that it does not supply electricity but merely facilitates its availability so the reimbursement qualifies under pure agent provisions and should not attract GST. The applicant’s counsel relied on Rule 33 of CGST Rules, 2017, which defines a pure agent as a person who incurs expenses on behalf of the recipient without holding any title to the goods or services. Electricity itself is exempt from GST and no tax should be levied on its reimbursement.
The bench of Dr. Tanisha Dutta and Joyjit Banik observed that where a lessor collects electricity charges at actuals without any markup from the lessee, such recovery does not form part of the taxable value of supply.Â
As clarified under Circular No. 206/18/2023-GST (Dated October 31, 2023), when Real Estate Owners, Resident Welfare Associations (RWAs), or Developers recover electricity costs at actuals, they act as pure agents, and GST is not applicable.
The AAR observed that electricity (HSN 2716 00 00) is exempt from GST under Sl. No. 104 of Notification No. 2/2017 – Central Tax (Rate). So, since the electricity charges are merely reimbursed at actuals and not a supply in itself, it is not subject to GST.
The AAR stated that Mega Flex Plastics Ltd qualifies as a pure agent in this case, and therefore, the reimbursement of electricity charges collected at actuals does not attract GST.
To Read the full text of the Order CLICK HERE
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