CA Roopa Nayak
Quick Summary
Background In recent times, there has been spate of notices issued by GST dept demanding GST with interest penalty on the reimbursement of electricity charges, collected by the landlords of commercial buildings as well as by building facility /maintenance service providers. These shocking demands
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FAQ :
Not necessarily. While the GST department has issued notices, a recent circular clarifies that if the supplier acts as a 'pure agent' and collects only the actual electricity costs without any markup, GST is not applicable on these reimbursements.
Acting as a pure agent means you have a contractual agreement to incur electricity costs on behalf of the recipient, you don't use the electricity yourself, you only recover the exact amount paid to the electricity provider, and this is clearly shown on your invoice separately from your own services.
If electricity is supplied bundled with renting of immovable property or maintenance services, it's considered a composite supply. The GST rate applicable to the principal supply (renting or maintenance) would apply, which is typically 18%.
The exemption for transmission and distribution of electricity applies only if the supplier is a licensed transmission or distribution entity under the Electricity Act. Landlords or facility providers collecting reimbursements are generally not considered such licensees.
The circular clarifies that if landlords, developers, or RWAs collect electricity charges from tenants or occupants as a 'pure agent' (recovering actual costs without markup), these charges are not part of their taxable supply and thus GST is not leviable.
Ensure you meet the 'pure agent' conditions: have authorisation, recover only actual costs without markup, use separate meters, and clearly show the reimbursement on invoices. It's advisable to inform your jurisdictional GST officer about your position based on the circular.
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