Case Law Details
In re Close North Apartment Owner’s Association (GST AAR Haryana)
Question 1. Whether GST is applicable on the Common Area Electricity charges collected, on actual basis, by the Applicant from the residents of the apartment complex, or not?
Yes at the rate of 18% (SGST 9%+CGST 9%)
Question 2. Whether GST is applicable on the Common Area Electricity charges collected, with a margin, by the Applicant from the residents of the apartment complex, or not?
Yes
Question 3. What should he the basis of allocation of Common Area Electricity Charges to the units in the apartment complex?
Not Applicable. Question asked by the applicant is not covered under section 97(2) of the CGST/HGST Act, 2017 as amended.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, HARYANA
1. APPLICANT’S ELIGIBILITY FOR SEEKING AN ADVANCE RULING:
1.1 To file an application before the Authority of Advance Ruling, the applicant must satisfy the conditions prescribed under the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act, 2017) and Haryana Goods and Services Tax Act, 2017 (hereinafter referred to as HGST Act, 2017). Since the provisions of both the Acts arc parimateria, any reference to provisions of CGS’I’ Act, 2017 in this order should be construed as a reference to corresponding provisions in CGST Act, 2017 as well.
1.2 Sections 97(2) (a)(h)& (c) read with Section 95 of the CGST Act, 2017 prescribes that Advance Ruling may be sought inter alia on the question of (a) Classification of goods and/or services or both. (b) Applicability of a notification issue under the provisions of this Act. (e) Determination of the liability to pay tax on any goods or services or both. (g) Whether particular thing done by the applicant with respect to any goods and or services or both amounts to or results in a supply of goods and/or services or both, within the meaning of that term.
1.3 There is no bar on an applicant from seeking an Advance Ruling in terms of Section 98(2) of CGST Act, 2017 in as much as the questions raised by the applicant, the same are neither pending nor decided in any proceedings in the ease of the applicant under the proceedings in
electricity within the WIN shall 1w owned and managed by the GIIS/ Developer/ RWA.”
2.5 The Electricity Regulations, 2013 have been amended to Single Point Supply to Employers’ Colonies Group Housing Societies, Residential Colonies, Office cum Residential complexes and Commercial Complexes of Developers, and Industrial Estates/IT park/SEZ Regulations, 2020 (“hereinafter referred to as the Electricity Regulations, 2020) vide notification dated 22 April 2020 issued by the Haryana Electricity Regulatory Commission. The relevant extract has been reproduced hereunder for easy reference:
“4. Supply of electricity by the distribution licensee to the Group Housing Societies (G IISs)
4.2 the distribution licensee, on an application from the GUS, as per clause (a) shall give Single point Supply to the GUS at 11 kV or higher voltage, depending upon the feasibility, for making electricity available to the residents/members residing in the Colony and for common services/ non-domestic loads. Provided the distribution of electricity within the GHS shall be owned and managed by the GHS.”
He has also referred to the para 6.6 of the EA, 2020 which is as following:-
“a) The Employer/GHS/Users Associations will not charge the Residents/Individual Consumer Common Services and other category loads in the Colony/GHS/ Complex for electricity supplied, at a rate higher than the tariff for Domestic Supply (DS)/other relevant category, approved by the Commission from time to time.”
2.6 The applicant stated that electricity supplied by the State Electricity Board and there is a Single Point 13ulk connection or a common electricity meter for the entire complex which is in the name of the Applicant. The Applicant has, in turn, installed the sub-meters in the premises of the individual flat owners for measuring the electricity consumption of each such unit and also a separate sub-meter is installed for units consumed towards common area electricity. This is done because the distribution of electricity within the apartment complex is to be owned and managed by the Applicant as required under para 4.1.2 of the Electricity Regulations 2013 and subsequently para 4.2 of the Electricity Regulations 2020.
2.7 The electricity bill issued by the State Electricity Board is received in the name of the Applicant. Thereafter, the Applicant raises invoice/ bills in the name of individual flat owners based on the electricity consumed by the individual unit under the following heads:
- Actual reading as per sub-meter — Individual user is billed on the basis of actual electricity consumed as recorded in the sub-meter installed at their premises. No GST is being paid by the Applicant on electricity charges recovered from individual users as per sub-meter readings.
- Back up electricity charged Individual user is billed on the basis of actual DC set units consumed at the decided rate per unit. GST @18% is being charged on this amount in the electricity bill raised on the individual users.
- Common Area Electricity or CAE charges The Applicant recovers common area electricity charges for use in corridors, pathways, gardens. club house, swimming pool, lifts etc. from individual users on per square feet basis based on the super built-up area owned by the users.
2.8 Since, RWA has obtained a Single Point Bulk supply connection under para 4.1 of the Electricity Regulations 2013 amended vide Electricity Regulations 2020. the distribution of electricity within the apartment complex would be owned and managed by it and GST would not leviable on the CAE charges recovered by the Applicant on actual basis from the individual users.
2.9 QUESION(S) WHICH ADVANCE RULING HAS BEEN SOUGIHT:
Question 1. Whether GST is applicable on the Common Area Electricity charges collected, on actual basis, by the Applicant from the residents of the apartment complex, or not?
Question 2. Whether GST is applicable on the Common Area Electricity charges collected, with a margin, by the Applicant from the residents of the apartment complex, or not?
Question 3. What should he the basis of allocation of Common Area Electricity Charges to the units in the apartment complex?
3. APPLICANT’S VIEW POINT AND SUBMISSIONS ON ISSUES ON WHICH THE ADVANCE RULING IS BEING SOUGHT:
3.1 At the outset, the Applicant would like state that the entry no. 53 of List II of Seventh Schedule of the Constitution of India specifically covers “taxes on the consumption or sale of electricity”, thus making sale of electricity a State subject wherein the state government has exclusive right to make laws.
3.2 The power to levy tax on entries in List-I of Seventh Schedule of the Constitution of India continues to be with Union Government and this does not include sale of electricity within its ambit. Further, while all the conflicting entries in these schedules have either been removed or been modified by clause 17 of The Constitution (One Hundred & First Amendment) Act, 2017, right to tax consumption or sale of electricity continues to remain under List II of Seventh Schedule and therefore the state government alone has the right to tax this akin to taxes on land and building, sale of liquor for human consumption etc. Also, power to impose Goods & Service Tax in India is governed by Article 246A & Seventh Schedule of the Constitution of India and thus right to levy tax on electricity is not covered under this.
3.3 Applicant would like to state that Electricity or electrical energy has been held to be goods by the I lon’ble Supreme Court re Commissioner of Sales Tax. Madhya Pradesh, Indore Vs. Madhya Pradesh Electricity Board, Jabalpur- 1969 (2) SCR 939. Further, the Constitution Bench of the Flon’ble Supreme Court in State of A.P. etc. v. National Thermal Power Corpn. Ltd. and Ors. etc. (2002-TIOL-107-SC-CT) held that electricity though an intangible object is ‘goods’ covered by Entry 54 of List II of Seventh Schedule to the Constitution of India.
3.4 Hence ‘electricity’ is goods and also excisable goods which found a mention in the erstwhile Central Excise Tariff Act, 1985. Even under (15.1* “Electrical energy” has been classified as goods and specific exemption has been granted vide sl. No. 104 of Notification No. 2/ 2017- Central Tax (Rate) dated 28 June 2017. If that had not been the case there was no necessity of specifically exempting supply of electrical energy from the payment of GST.
connection, rental charges towards metering equipment etc chargeable to GST However, the Gujarat High Court re Torrent Power Limited vs Union of India in Special Civil Application No. 5343 Of 2018 dated 19 December 2018 held paragraph 4(1) of the impugned Circular as being ultra vires and was thereby struck down. The High Court further held that charges such an application fee, meter rent testing fee, etc. collected by Torrent Power Limited are part of composite supply of which principal supply is the actual supply of electricity therefore the entire composite supply is exempt from tax.
3.13 Further. the following clarification issued by CBIC side E.No332 04 20: “IRU through EAQs on levy of GST on supply of services to Co-operative Society states that:
‘Similarly. GST is not leviable on .Von -Agricultural Tax Electricity Charges which are collected under other statutes from individual fiat owners flowerer. these charges are collected by the Society for generation of electricity by Society’s generator or to provide drinking water facility or any other service then suck charges collected by the society are liable to GST.”
3.14 The CBIC has adequately clarified that GST would not be leviable on electricity charges collected under other statues from individual flat owners. The CAE charges arc collected by the Applicant in terms of Electricity Regulations_ 2013/ Electricity Regulations. 2020 through the Single Point Supply connection under Bulk Supply (Domestic) scheme of the I laryana State Government and therefore outside the purview of GST.
4. PERSONAL HEARING:
Shri Bhupendra, Chartered Accountant appeared on behalf of the applicant before the Authority of Advance Ruling and reiterated the details .which has already been submitted in the application dated 26.04.2022 besides submitting the additional documents in support of his contentions.
5. DISCUSSION AND FINDING:
5.1 We have carefully gone through the application including the written as well as verbal submissions made by the Applicant at the time of personal hearing. On critical examination of the application, it has been observed that the main issue involves in the said application is that whether the GST is liable to be paid on Common Area Electricity (CAE) charges recovered by RWA from the member of the society or not?
5.2. In the instance case, the applicant recovers electricity charges for use in corridors, pathways., gardens. club house, swimming pool, lifts etc. from the each individual user on per square feet basis based on the super built-up areas of each flat. The electric supplied by the State Electricity Board for the entire complex by single point connection and common electricity meter is installed for it.
5.3 The first two questions relates to taxability of amount recovered from the members of society as Common Area Electricity (CAE) charges. which arc paid by the applicant to the State Electricity board for the electricity consumed towards Common Area.
5.4 The applicant has also stated that they have installed the sub-meters for units consumed for Common Area electricity and the amount is recovered from the each individual, flat owners for usage of corridors, pathways. gardens. club house, swimming pool, lifts etc.
5.5 The issue is being examined by us considering all the facts available on the record and legal provisions with reference to it. It is observed issue a similar issue has been decided by the K AAI2 in its order dated 17.09.2019 in the case of Prestige South Ridge Apartment Owners’ Association (Advance Ruling No. KAR ADRG 42/2019, dated 17-9-2019 [2019 (30) G.S.T.I..107). The operative part of this order with reference to the issue at hand is as under;-
“The applicant, in this regard admitted that they pay electricity changes and ‘wont the amount from members /or the electric’ power consumed towards lighting of common areas Further they propose to recover the actual charges paid to Electricity Suppliers, in respect of the power consumption for common area from the members proportionate to the carpet area owned by them, by raising a debit note indicating the proportionate electricity charges.
The electricity bill received in relation to the consumption of electricity for the common utilities is in the name of the applicant. The applicant is not involved in the supply of electrical energy to the members but is involved in providing the service of upkeep and maintenance of the common utilities of the apartments and for this the electricity consumed by them becomes an input. Though the electricity bill is distributed to all its members, it is not the consideration for the supply of electrical energy to the members but the value is a part of the consideration for the supply of services to its members and hence is liable to tax at appropriate rates.
Hence this value of electricity charges separately shown in the invoices is to be added to the considerations shown towards the same service of upkeep and maintenance charged to individual members and then the consideration /or the supply of such service is to be arrived and the taxable value shall be determined”
This authority too have similar views on the matter i.e. the value of electricity charges separately shown in the invoice is to be added to the taxable turnover under the provisions of the CGST/HGST Act, 2017.
5.6 It is concluded that an amount recovered by the applicant from its members on the basis of per square foot on super build up area of each unit, GST is liable to be recovered from him @ 18 % 19 % CGST and 9 % HGST] under CGST/HGST Act, 2017 as amended.
5.7 The third question asked by the applicant is not covered under section 97(2) of the CGST/HGST Act, 2017 as amended.
6. Ruling:
This Ruling is Valid only within the jurisdiction of Advance Ruling Authority, Haryana and subject to the provisions under Section 103(2) of the CGST Act, 2017 until and unless declared void under section 104(1) of the Act, ibid.
