In re A to Z Food Ventures LLP (GST AAR Telangana)
Summary: The Telangana Authority for Advance Ruling, in TS AAR Order No. 11/2026 dated 30 October 2026, considered the GST treatment of electricity and water charges reimbursed by A to Z Food Ventures LLP to its lessor, GAR Hotels & Estates Private Limited. The applicant operated restaurants and coffee cafes under the brand “Roast” in Hyderabad and had leased commercial premises at “Laxmi Pinnacle” for business expansion. Apart from monthly rent, the lease required it to bear utility charges attributable to actual consumption. According to the applicant, separate electricity and water meters measured consumption, and the lessor recovered the charges against supporting bills and consumption calculations.
The applicant sought clarification on whether electricity and water reimbursements were liable to GST or could be excluded from the value of taxable supply under Rule 33. It also asked whether the lessor’s recovery of those charges without any markup or profit qualified as expenditure incurred as a pure agent. The Authority recorded that the first two questions fell within Section 97 of the GST Act. The application was admitted after examination of the records and hearing the applicant. Its authorised representative appeared on 30 September 2026 and reiterated the application’s submissions.
The Authority referred to Section 11(1) and Notification No. 2/2017 dated 28 June 2017, identifying electrical energy under Serial No. 104, heading 2716 00 00, and water covered by Serial No. 99, HSN 2201. It reproduced Rule 33, including the requirements concerning recipient authorisation, separate invoice disclosure and procurement of supplies in addition to the supplier’s own services. The explanation to the rule requires a contractual pure-agent arrangement, absence of title or personal use, and recovery only of the actual expenditure incurred.
The Authority also relied on CBIC Circular No. 206/18/2023-GST dated 31 October 2023. The circular explains that electricity bundled with renting or maintenance ordinarily forms part of a composite supply taxable according to the principal supply, even where electricity is billed separately. However, electricity supplied as a pure agent does not form part of the supplier’s taxable value. Where the amount recovered from occupants equals the amount charged by the electricity board or DISCOM, the circular treats the supplier as acting as a pure agent for that supply.
The Authority ruled that electricity charges paid by the applicant to its lessor could be excluded from taxable value if the lessor complied with the provisions governing a pure agent and recovered the charges on an actual basis. The electricity charges must be indicated in the invoice and recovered without any surplus or deficit. The same ruling applied to water covered by Serial No. 99 of Notification No. 2/2017. The third question, concerning whether the lessor’s recoveries qualified as pure-agent expenditure, was held to be outside the Authority’s purview. Accordingly, the relief on electricity and eligible water reimbursements remained conditional; the Authority did not give an unconditional determination of the lessor’s pure-agent status.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, TELANGANA
[ORDER UNDER SECTION 98(4) OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 AND UNDER SECTION 98(4) OF THE TELANGANA GOODS AND SERVICES TAX ACT, 2017.]
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1. M/s. A to Z Food Ventures LLP, Hyderabad – 500032, Telangana (GSTIN: 36ACCFA2749L1Z8) has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules.
2. At the outset, it is made clear that the provisions of both the CGST Act and the TGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the TGST Act. Further, for the purposes of this Advance Ruling, the expression ‘GST Act’ would be a common reference to both CGST Act and TGST Act.
3. It is observed that the first two queries raised by the applicant fall within the ambit of Section 97 of the GST ACT. The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- under SGST and Rs.5,000/- under CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided nor are pending before any authority under any provisions of the CGST/TGST Act’2017. The application is, therefore, admitted after examining it and the records called for and after hearing the applicant as per section 98(2) of TGST Act’2017.
4. BRIEF FACTS OF THE CASE:
4.1 M/s. A to Z Food Ventures LLP having GSTIN: 36ACCFA2749L1Z8, Plot No. 42 & 44, Sy.No. 18,19 to 22 Roast 24 by 7, Ground Floor, Telecom Nagar, Hyderabad – 500 032.
4.2 M/s. A to Z Food Ventures LLP is engaged in the business of operating restaurants and coffee cafes under the brand name “Roast” in Hyderabad and is registered under the Central Goods and Services Tax Act, 2017 and the Telangana Goods and Service Tax Act,2017.
For the purpose of expanding business operations, they have taken commercial premises situated at “Laxmi Pinnacle” on lease from M/s. GAR Hotels & Estates Private Limited.
Under the terms of the Lease Agreements, besides the agreed monthly rent, they are contractually required to bear the electricity and water charges attributable to our actual consumption in the leased premises. Such charges are determined based on separate electricity and water meter readings installed for the leased premises and are recovered by the lessor only upon production of detailed supporting bills and consumption calculations.
5. QUESTION RAISED:
5.1 Whether the reimbursement of electricity charges paid by us to our lessor, M/s. GAR Hotels & Estates Private Limited, in accordance with the terms of the Lease Agreement and based on actual meter readings and supporting electricity bills, is liable to GST or is excludable from the value of taxable supply under Rule 33 of the CGST Rules, 2017?
5.2 Whether the reimbursement of water charges paid by us to our lessor, M/s. GAR Hotels & Estates Private Limited, in accordance with the terms of the Lease Agreement and based on actual water consumption and supporting bills, is liable to GST or is excludable from the value of taxable supply under Rule 33 of the CGST Rules, 2017?
5.3 Whether the recovery of electricity and water charges by the lessor, strictly in terms of the Lease Agreement and without any markup or profit element, qualifies as expenditure incurred by a Pure Agent under Rule 33 of the CGST Rules, 2017?
6. PERSONAL HEARING:
The authorized representative Sri Pavan Mashetti, CA, appeared before the AAR on 30.09.2026 and reiterated their averments in the application submitted.
7. DISCUSSION & FINDINGS:
7.1 Section 11 (1) of the CGST Act 2017 enumerates the power of Government to grant exemption on Goods or Services or both either absolutely or subject to any conditions on the recommendation of the council by a notification.
Accordingly by Notification No. 02/2017 dated: 28.06.2017 the Government of India provided for exemption from tax under CGST Act, 2017 on Electrical energy at Serial No. 104 with Chapter heading ‘2716 00 00’. As seen from the notification there are no conditions specified for this exemption. Similarly water is exempt as per notification No. 2/2017, dated. 28.06.20217 at Sl.No. 99 vide HSN code 2201 .
7.2 Rule 33, of CGST Rules 2017, Reads as under:
Value of supply of services in case of pure agent
Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely;
i. The supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorization by such recipient;
ii. The payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service and
iii. The supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.
Explanation:- For the purposes of this rule, the expression “pure agent” means a person who-
a. Enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;
b. Neither intends to hold nor holds any title to the goods or service or both so procured or supplied as pure agent of the recipient of supply;
c. Does not use for his own interest such goods or services so procured and
d. Receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.
7.3 The rule 33 of the CGST Rules excludes the expenditure or costs incurred by a supplier as a pure agent of the recipient of the supply subject to the conditions prescribed in the rule. The rule also has an illustration for describing a pure agent:
“Illustration to rule 33 of the CGST rules: Corporate services firm A is engaged to handle the legal was pertaining to the incorporation of Company B. Other than its service fees, A recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar Companies for the registration and approval of the name are compulsorily level on B. A is merely acting as a pure agent in the payment of those fees. Therefore A’s recovery of such expenses is a disbursement and not part of the value supply made by A to B”.
Further, CBIC vide Circular No. 206/18/2023-GST, dated. 31.10.2023, F. No.CBIC-190354/195/2023-TO (TRU-II)-CBEC, have clarified that “whenever electricity is being supplied bundled with renting of immovable property and/or maintenance of premises, as the case may be,it forms a part of composite supply and shall be taxed accordingly. The principal supply is renting of immovable property and /or maintenance of premise, as the case may be, and the supply of electricity is an ancillary supply as the case may be. Even if electricity is billed separately, the supplies will constitute a composite supply and therefore, the rate of the principal supply i.e., GST rate on renting of immovable property and/or maintenance of premise, as the case may be, would be applicable.
However, where the electricity is supplied by the Real Estate Owners, Resident Welfare Associations (RWAs), Real Estate Developers etc., as a pure agent, it will not form part of value of their supply. Further, whether they charge for electricity on actual basis that is, they charge the same amount for electricity from their lessees or occupants as charged by the State Electricity Boards or DISCOMs from them, they will be deemed to be acting as pure agent for this supply.”
8. In view of the foregoing, we rule as follows:
In view of the above discussion, the questions raised by the applicant is clarified as below:
| Question | Ruling |
|---|---|
| 1. Whether the reimbursement of electricity charges paid by us to our lessor, M/s. GAR Hotels & Estates Private Limited, in accordance with the terms of the Lease Agreement and based on actual meter readings and supporting electricity bills, is liable to GST or is excludable from the value of taxable supply under Rule 33 of the CGST Rules, 2017? | The applicant is eligible to exclude the electricity charges paid to its lessor from the value of taxable supply, if the lessor acts in accordance with the provisions governing “pure agent” and the charges are collected from the lessee on actual basis. The lessor has to indicate the electricity charges in the invoice and charged to the lessee only on the actual basis without making any surplus or deficit. |
| 2. Whether the reimbursement of water charges paid by us to our lessor, M/s.GAR Hotels & Estates Private Limited, in accordance with the terms of the Lease Agreement and based on actual water consumption and supporting bills, is liable to GST or is excludable from the value of taxable supply under Rule 33 of the CGST Rules, 2017? | The Ruling given against the above question no.1 also applies for supply of water covered in Sl.No.99 of notification No.2/2017, dated. 28.06.2017. |
| 3. Whether the recovery of electricity and water charges by the lessor, strictly in terms of the Lease Agreement and without any markup or profit element, qualifies as expenditure incurred by a Pure Agent under Rule 33 of the CGST Rules, 2017? | The question raised by the applicant is not under the purview of this Authority. |
