Real property builders and RWAs might be liable to pay 18 per cent GST on electrical energy payments in the event that they cost from flat house owners greater than the ability tariff prescribed by Discoms.
The Central Board of Indirect Taxes and Customs (CBIC) has issued a clarification on the applicability of GST on reimbursement of electrical energy expenses obtained by actual property corporations, malls, airport operators and many others. from their lessees/occupants.
As per the clarification, the place electrical energy is provided by the actual property house owners, resident welfare associations (RWAs), actual property builders and many others as a pure agent, it is not going to kind part of the worth of their provide.
It additional stated the place they cost for electrical energy on an precise foundation that’s, they cost the identical quantity for electrical energy from their lessees or occupants as charged by the state electrical energy boards or Discoms, they are going to be deemed to be appearing as ‘pure agent’ for this provide, and therefore GST is not going to be levied.
The CBIC clarification got here after doubts had been raised on the applicability of GST on the electrical energy provide by actual property corporations, malls, airport operators and many others to their lessees or occupants.
It is clarified that each time electrical energy is being provided bundled with renting of immovable property and/or upkeep of premises, because the case could also be, it types part of the composite provide and shall be taxed accordingly.
The principal provide is renting of immovable property and/or upkeep of the premise, because the case could also be, and the provision of electrical energy is an ancillary provide because the case could also 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,” the CBIC stated.
However, the place the electrical energy is provided by the actual property house owners, RWAs, actual property builders and many others as a ‘pure agent’, it is not going to be thought of as a provide, and therefore no tax might be levied, it added.
AMRG & Associates Senior Partner Rajat Mohan stated the CBIC has offered clarification concerning the tax remedy of electrical energy provide when bundled with the rental of immovable property and/or upkeep of premises.
“In such cases, this arrangement is considered a composite supply and is subject to a tax rate of 18 per cent. It is important to note that billing for electricity separately will not neutralise the tax liability,” Mohan stated.
However, when electrical energy is provided by builders and RWAs within the capability of a “pure agent,” it is going to be exempt from taxation. ”It is value mentioning that this clarification might not supply reduction to each taxpayer, because the circumstances specified within the ’pure agent’ guidelines are fairly stringent.
Moreover, the detailed breakdown of varied elements inside electrical energy payments, particularly in a big condominium neighborhood setting, could be advanced and difficult,” Mohan added.
EY Partner Saurabh Agarwal stated the current clarification issued by the CBIC has raised vital considerations inside the actual property sector.
“Going forward, the said clarification may lead to an increase in the rental cost, as landlords may factor the GST cost on electricity when determining lease rental amounts,” Agarwal stated.
In circumstances the place actual property corporations convert excessive-rigidity strains to low-rigidity strains and cost greater charges as a result of transmission loss, the implications of this clarification stay some extent of concern.
“This clarification provides the tax department with a basis to address previous issues and potentially issue new notices to landlords who have not charged GST on electricity reimbursements,” Agarwal added.
(This story has not been edited by News18 employees and is revealed from a syndicated information company feed – PTI)
