Recovery of Electricity charges from members on Actual Basis liable to GST with Ceiling Limit: AAR [Read Order]

The Authority for Advance Ruling (AAR) in Karnataka held that recovery of electricity charges from Association members on actual basis is liable to Goods and Service Tax (GST) with ceiling limit.

The applicant, M/s Sandeep Vihar Owners Association, is an Apartment Owner’s Association duly registered under the Karnataka Societies Registration Act, 1960. The applicant is responsible for the security, housekeeping, and overall maintenance of the complex, including waste management, essential services, and the supply of potable water.

One of the issues on which the applicant sought advance ruling was whether the applicant was liable to pay GST on collection of Common Area Electricity Charges paid by the members and the same recovered on the actual electricity charges billed. It was submitted that as per Notification No. 02/2017-Central Tax (rate) dated 28.06.2017, exemption is granted on electrical energy.

Further, it was submitted that since electrical energy itself is exempt from GST, it cannot be clubbed with other supplies made by the Applicant to form a composite supply, as a composite supply under Section 2(30) of the CGST Act necessarily requires two or more taxable supplies. The applicant also made reference to Rule 33 of the CGST Rules, 2017 which states that expenditures or costs incurred by a supplier as a pure agent are to be excluded from the value of the supply.

The AAR held that the amount is liable to GST at the applicable rate, subject to the ceiling prescribed under Serial No. 77 of the said Notification. It was noted that the applicant does not satisfy all the conditions to be a “pure agent” for the electricity charges recovered from members.

Finally, the two member bench of Kalyanam Rajesh Rama Rao and Sivakumar S Itagi, held that the recovery of electricity charges for common areas from members is considered part of the maintenance services provided by the Association and is subject to GST in accordance with the ceilings specified.

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