In re Antara Purukul Senior Living Limited (GST AAR Uttarakhand)
GST payable on electricity charges recovered on actual cost basis from residents by company providing services of residential apartments
The applicant has sought advance ruling on the following questions:
1. Whether the electricity charges paid to UPCL for the power consumed by residents in their residential apartments and recovered from them on actual cost basis liable to GST?
The electricity charges paid to UPCL for the power consumed by residents in their residential apartments and recovered from them on actual cost basis is liable to GST.
2. Whether the electricity charges paid to UPCL (Electricity supply authority) for the power consumed towards common area and recovered from residents on actual cost basis are liable to GST?
The electricity charges paid to UPCL (Electricity supply authority) for the power consumed towards common area and recovered from residents on actual cost basis is liable to GST.
3. Whether Asset Replacement Deposits collected from residents are liable to GST?
The amounts collected towards Asset Replacement Deposits, amounts to advancement for future supply of services to residents, are taxable, in terms of Section 13(2)(a) of the CGST Act, 2017.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, UTTARAKHAND
1. This is an application under Sub-Section (1) of Section 97 of the Central Goods & Service Tax Act, 2017 and Uttarakhand State Goods & Service Tax Act, 2017 (hereinafter referred to as CGST/SGST Act) and the rules made there under filed by M/s Antara Purukul Senior Living Limited having its registered office at Guniyal Gaon, P.O.: Sinola, Dehradun – 248009, Uttarakhand (herein after referred to as the “applicant”), a registered Public Limited Company under Companies Act, and registered with GSTIN- 05AAGCS4077C1ZJ under the CGST Act, 2017 read with the provisions of the UGGST Act, 2017 (hereinafter referred to as the applicant’).
2. (i) The applicant has developed a residential community providing services of residential apartments, maintenance and other common facilities to the residents of senior living community by entering into a lease agreement and the maintenance and facilities agreement and collects maintenance and facilities (herein after referred to as the “Antara Comprehensive Benefits” or “ACB”) charges on recurring basis from the residents under the following heads.
1. ACB Charges- ACB contributions from its residents is calculated on the basis of certain apportion of yearly proposed budget of expenses of super built area by the number of residents.
2. Asset Replacement Deposits
Following goods and services are collected under Antara Comprehensive Benefits:
1. Safety & Security Services
2. Operation & Maintenance Services of the Club and Common Areas
3. Maintenance of Apartments
4. Health Services
5. Concierge Services
6. Transportation
7. Other services and facilities
Electricity charges- The invoice is raised by the UPCL (Electricity Supply Authority) for electricity charges in the name of the applicant and is liable to pay the total amount of electricity charges on behalf of the residents and common area electricity consumption shared by the residents and the applicant.
Hence, the applicant has divided electricity charges under the following heads: –
1. Utility residential charges (recovered from residents)
2. Common Area Electricity Charges
i. ACB Common Area Electricity Charges (recovered from residents)
ii. Non-ACB Common Electricity Charges (treated as expenses of Antara)
For the same the applicant has installed sub-meters on the apartments of the residents to record their consumption of electricity and recovers electricity charges from the residents on actual cost incurred. These charges are recorded separately under head Utility residential charges.
The remaining amount of electricity charges is treated as common area electricity charges for which the applicant and the residents have mutually agreed to pay common area electricity charges on proportionate basis. The Electricity charges are calculated on estimated consumption of electricity for common area from the yearly proposed budget of expenses. Wherein, the amount is recovered from the residents in accordance to the built area by the number of residents of the agreed proportion of electricity charges. The applicant calculates the total expenses actual incurred for electricity consumption at year end and raise debit notes to the residents if there is short or excess in amount collected from residents as per estimated consumption electricity charges than actual consumption of electricity charges.
2 (ii) Asset Replacement Deposit – In order to meet any planned or unplanned capital outlay in future, the applicant recovers such amount at INR 4.41 of super area in accordance to mutual agreement between them and residents. The Asset Replacement Deposits are non-refundable deposits and any short in deposits for capital outlay would be filled by them (as service provider and owner of the properties). The accounts of such deposit are separately maintained and separate debit notes are raised to the residents. These deposits would be used for the said purpose and not towards regular Antara Comprehensive Benefits.
In view of the above facts the applicant has sought advance ruling on the following questions:
1. Whether the electricity charges paid to UPCL for the power consumed by residents in their residential apartments and recovered from them on actual cost basis liable to GST?
2. Whether the electricity charges paid to UPCL (Electricity supply authority) for the power consumed towards common area and recovered from residents on actual cost basis are liable to GST?
3. Whether Asset Replacement Deposits collected from residents are liable to GST?
3. At the outset, we would like to state that the provisions of both the CGST Act and the SGST Act are the same except for certain provisions; therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the SGST Act.
4. The Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on questions specified in sub section (2) of section 97 or sub section (1) of section 100 in relation to the supply of goods or services or both being undertaken or proposed to he undertaken by the applicant.
5. As per the said subsection (2) of Section 97 of the Act advance ruling can be sought by an applicant in respect of :
(a) Classification of any goods or services or both
(b) Applicability of a notification issued under the provisions of this Act,
(c) Determination of time and value of supply of goods or services or both,
(d) Admissibility of input tax credit of tax paid or deemed to have been paid
(e) Determination of the liability to pay tax on any goods or services or both
(f) Whether the applicant is required to be registered
(g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both within the meaning of that term.
6. In the present case applicant has sought advance ruling on applicability of GST. therefore, in terms of said section 97(2) of the Act, the present application is hereby admitted.
7. Accordingly opportunity of personal hearing was granted to the applicant on 28.09.2021. Shri Verendra Kalra (Chartered Accountant), on behalf of the applicant appeared for personal hearing and re-iterated the submission as filed with the application. He also cited the advance rulings of Gujarat & Karnataka in this regard. Ms Preeti Manral, Deputy Commissioner, SGST-Dehradun, cconcerned officer, from the State Authority, was also present during the hearing proceedings. She objected to the contention of the applicant, w.r.t. their claim of being considered as a “pure agent” as per the terms of “MAINTENANCE & FACILITY AGREEMENT”, as Article 15.1 of the said agreement clearly provided that, “No provision of this Maintenance 6 Facilities Agreement shall be deemed to constitute a partnership or joint venture between the parties or constitute any Party as the legal representative or agent of any other Party.” Further she submitted that the applicant doesn’t fulfill, all the conditions as laid down in rule 33 of CGST/SGST Rules. Hence, the electricity charges recovered from residents on actual cost basis are naturally bundled with the services of the residential apartments and qualify as composite supply, therefore, liable to GST.
8. We find that the applicant is a registered Public Limited Company under Companies Act, And registered with GSTIN- 05AAGCS4077C1Z1 in Uttar and at Guniyal Gaon, P.O. -Sinola, Dehradun 248009, Uttarakhand and in their application dated 17.08.2021 and written submission dated 04.10.2021, the applicant submitted that:
i) They are liable to pay electricity charges to UPCL for the power consumed by the residents and common area shared by the residents and the applicant for which they receives the invoices of electricity charges with no GST levied on it, as the electricity charges are exempt vide Notification No. 12/2017 Central Tax (Rate), dated June 28, 2017. And that they are involved in purely passing through of the electricity charges charged by the UPCL to the residents proportionately under the following heads: –
1. Utility residential charges (recovered from residents)
2. Common Area Electricity Charges
(i) ACB Common Area Electricity Charges (recovered from residents)
(ii) Non-ACB Common Electricity Charges (treated as expenses of Antara)
And that to record actual consumption of electricity and collect the amount of electricity charges on actual cost or volume consumed by the resident, sub-meters have been installed on the apartments.
ii) Asset Replacement Deposits – There is no supply of goods or services provided to the residents at the time of collection, the amount collected is only a transaction of money, and that this transaction does not qualify as “supply” as per GST law, as there is no application of such deposit at the time of receipt of the deposit and so the Applicant is not liable to make GST on this transaction, And for any transaction to get considered as supply there has to be consideration involved in the same, as defined in Section 2(31) of CGST Act, 2017.
9. We find that the applicant the “Lessor” has entered into a “MAINTENANCE & FACILITIES AGREEMENT” with the Lessee i.e. the service receiver, the owner/occupant resident of the Community. In the said agreement it is very clearly spelt out that the applicant has developed a residential community for senior living (the “Community)’ and the word “Community” has been conceptualized as providing residential apartments, infrastructure, The club, support services and other amenities for use and occupation by its residents (the owner/occupant resident of the Community) and has claimed himself as a “pure agent”, in terms of Rule 33 of the GST Valuation Rules, 2017 and in claiming so, they have contended that electricity charges on the basis of actual consumption by Lessee i.e. the service receiver, the owner/occupant resident of the Community in their residential unit and on proportionate basis of the common area are collected by them and further paid to the state Electricity Board.
10. We find that the concept of pure agent has been borrowed from the erstwhile Service Tax Determination of Value Rules, 2006 and carried forward under GST. For clear perspective Rule 33 of the CGST Rules, 2017 is reproduced hereunder:
“33. 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 he 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 authorisation 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 services 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.”
10.2. From the above it is seen that a pure agent is one who while making a supply to the recipient, also receives and incurs expenditure on some other supply on behalf of the recipient and claims reimbursement for such supplies from the recipient of the main supply and while the relationship between them in respect of the main service is on a principal to principal basis, the relationship between them in respect of other ancillary services is that of a pure agent, but the important thing to note is that a pure agent does not use the goods or services so procured for his own interest and this fact has to be determined from the terms of the contract. Hence, to ascertain the above facts proper scrutiny of the documents submitted by the applicant with the instant application is imperative.
11. It is seen that the “Lessor” the applicant and “Lessee has entered into a “LEASE DEED’ (registered) on the basis of an “Application Form” and an “Allotment Letter” for an “Apartment”. In the Lease deed it has also been spelt out that the Lessor has developed a residential community for senior living on the Community land. The Community provides residential apartments, infrastructure, support services and other amenities within a community for use and occupation by its residents. Further at Para 5.1 of the “LEASE DEED’, it has been clearly spelt and agreed upon that “The Lessee(s) agree that the common area and the Club within the (viiimunity shall be maintained and operated by the lessor and or a maintenance tiaency/ operating agency appointed by the Lessor for the same, from time to time. Simultaneously with the execution of this Lease Deed, the Lessee(s) have signed a separate agreement with the Lessor (the “Maintenance & Facilities Agreement”) for the provision of certain services including the maintenance and operation of the Club and the Common Area, as set out in the “Maintenance & Facilities Agreement (the “Services”)”.
Further, at Schedule 1 of the MAINTENANCE & FACILITIES AGREEMENT, “Maintenance & Facilities Agreement” shall mean this Maintenance & Facilities Agreement executed between the Parties, as amended from time to time. Also Para 1.3 of the said agreement defines provision of services as under:
“1.3 Provision of Services: In consideration of payment of Service Charges by the Lessee(s), the Lessor hereby agrees to render to the Lessee(s), the following services (“Services”):
a) services forming part of fixed monthly plan as specified in “Schedule 2″ (‘Antara Comprehensive Benefit or ACB”); and
b) Additional services as described in Clause 1.4 below (”Additional Services”). These Additional Services can be chosen by the Lessee at any time in accordance with the terms hereof”
From the above it is apparent and abundantly clear that the said agreement has been entered into, for rendering of services of a) Antara Comprehensive Benefit or ACB: and Additional services, to the Lessee(s) in consideration of payment of service charges.
b) The term “Additional Services” has been defined as
“2.4 Additional Services: The Additional Services can be opted by the Lessee(s) as per their preference or convenience keeping in view the schedule notified by the Lessor from time to time.
The Additional Services shall comprise the optional services which shall be: charged on a pay per use basis at rates specified by the Lessor. The Lessee(s) shall give reasonable notice to the Lessor for availing the optional services to enable the Lessor to organize the same.
The charges payable for Additional Services (“Additional Services Charge”) shall form part of Service Charges and shall be payable in accordance with the terms of this Maintenance & Facilities Agreements.”
11.2. Further as per Schedule 2 (LIST OF SERVICES FORMING PART OF ANTARA COMPREHENSIVE BENEFIT OF LESSOR AND AVAILED BY LESSEE(S) IN THE COMMUNITY” the term” Services” has been defined and for clear perspective, the same is reproduced as under:
“A. Services
Keeping in line with the Lessor’s vision for giving residents an unparalleled service experience, below are the Services Included in the fixed monthly plan and forming part of the ACB Charge:
1. Safety & Security Services: Safety of all occupants and their assets is of paramount importance to the Lessor, hence the following services will be provided: .
