The Authority For Advance Rulings, West Bengal in the case of M/s. Mega Flex Plastics Ltd. vide Case No. WBAAR 20 of 2024, Order No. 23/WBAAR/2024-25 dated 27.02.2025, has ruled that the applicant qualifies as a “pure agent” under Rule 33 of the CGST Rules, 2017 when collecting electricity charges from the sub-lessee. Since the applicant merely facilitates electricity payments without adding any markup and directly recovers the actual cost, these reimbursements do not form part of the taxable supply. The Ruling emphasised on the principle that landlords or lessors recovering electricity costs at actuals, without markup, act as pure agents and are not subject to GST on such reimbursements.
Facts of the Case:
The applicant, having entered into a sub-lease agreement with White Saffron Grains LLP for a warehouse space, charges monthly lease rent and recovers electricity charges on an actual basis. The electricity bills are received in the applicant’s name, and the cost is determined based on sub-meter readings before reimbursement from the sub-lessee.
The Applicant contented that such reimbursement qualifies as an exclusion under Rule 33 of the CGST Rules, 2017, as a pure agent.
AAR’s Rulings: The AAR made the following observations:
- The applicant satisfies all conditions under Rule 33, particularly the contractual agreement, absence of ownership over electricity, and direct pass-through of costs. The applicant’s agreement specifies that the sub-lessee is responsible for electricity costs, reimbursing the applicant based on sub-meter readings.
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The electricity consumption is attributed directly to the sub-lessee, with no markup or profit added by the applicant. Reference made to Circular No. 206/18/2023-GST, which provides that landlords and real estate developers collecting electricity charges on an actual basis from lessees act as pure agents.
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The electricity charges are recorded separately in invoices under ‘Reimbursement of Power Charges,’ calculated using a transparent formula.
The AAR Ruled that since the applicant does not provide electricity as a service but only facilitates its payment, the amount collected is not part of the lease transaction value. The ruling explicitly states that electricity charges collected on an actual basis are outside the scope of GST. The applicant is not liable to pay GST on reimbursement of electricity charges collected on an actual basis from the sub-lessee.
