In re Mega Flex Plastics Ltd (GST AAR West Bengal)
Authority for Advance Rulings (AAR), West Bengal, examined whether GST applies to the reimbursement of electricity charges collected by Mega Flex Plastics Ltd from its sub-lessee, White Saffron Grains LLP. The applicant had leased warehouse space under a sub-lease agreement, with provisions for the sub-lessee to reimburse electricity costs based on actual consumption. The company sought an advance ruling under Section 97 of the GST Act to clarify its tax liability on such reimbursements. The revenue department did not oppose the application, and the matter was admitted for review.
The applicant argued that under Rule 33 of the CGST Rules, 2017, it qualifies as a “pure agent” since it merely facilitates electricity supply without adding any markup. The rule defines a pure agent as one who pays expenses on behalf of another party without taking ownership of the goods or services. The company submitted that electricity charges collected from the sub-lessee are not part of the taxable supply under GST since the applicant neither supplies electricity nor profits from its cost. The applicant relied on Circular No. 206/18/2023-GST, which clarifies that real estate owners, housing societies, and developers acting as pure agents for electricity supply are not liable to pay GST on reimbursements.
