New Delhi:

Real estate developers and RWAs will be liable to pay 18 per cent GST on electricity bills if they charge from flat owners more than the power 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 electricity charges received by real estate companies, malls, airport operators etc from their lessees/occupants.

As per the clarification, where electricity is supplied by the real estate owners, resident welfare associations (RWAs), real estate developers etc as a pure agent, it will not form a part of the value of their supply.

It further said where they charge for electricity on an 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, they will be deemed to be acting as ‘pure agent’ for this supply, and hence GST will not be levied.

The CBIC clarification came after doubts were raised on the applicability of GST on the electricity supply by real estate companies, malls, airport operators etc to their lessees or occupants.

It is 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 the composite supply and shall be taxed accordingly.

The principal supply is renting of immovable property and/or maintenance of the 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,” the CBIC said.

However, where the electricity is supplied by the real estate owners, RWAs, real estate developers etc as a ‘pure agent’, it will not be considered as a supply, and hence no tax will be levied, it added.

AMRG & Associates Senior Partner Rajat Mohan said the CBIC has provided clarification regarding the tax treatment of electricity supply when bundled with the rental of immovable property and/or maintenance 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 said.

However, when electricity is supplied by developers and RWAs in the capacity of a “pure agent,” it will be exempt from taxation.

“It is worth mentioning that this clarification may not offer relief to every taxpayer, as the conditions specified in the ‘pure agent’ rules are quite stringent. Moreover, the detailed breakdown of various components within electricity bills, especially in a large apartment community setting, can be complex and challenging,” Mohan added.

EY Partner Saurabh Agarwal said the recent clarification issued by the CBIC has raised significant concerns within the real estate 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 said.

In cases where real estate companies convert high-tension lines to low-tension lines and charge higher rates due to transmission loss, the implications of this clarification remain a point 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,” Mr Agarwal added.
 

New Delhi:

GST collections increased 13 per cent to Rs 1.72 lakh crore in October, the second highest-ever, helped by momentum in the economy, efforts of taxmen in checking evasion and festive demand.

“GST revenue collection for October 2023 is second highest ever, next only to April 2023, at Rs 1.72 lakh crore; records increase of 13 per cent Y-o-Y,” the finance ministry said in a statement.

The highest-ever revenue from Goods and Services Tax (GST) was recorded in April 2023 at Rs 1.87 lakh crore, while in September, it was Rs 1.63 lakh crore.

The average gross monthly GST collection in the current fiscal has also shown an 11 per cent growth year-on-year at Rs 1.66 lakh crore.

Icra Chief Economist Aditi Nayar said GST collections benefited from quarter-end adjustments related to transactions in the previous month and the overall momentum in the economy.

“With this, the pace of YoY growth jumped to a 10-month high in October 2023, which is encouraging. At present, we project the CGST collections to mildly exceed the FY2024 BE,” Ms Nayar said.

During October, revenue from domestic transactions was 13 per cent higher year-on-year.

The gross GST revenue collected in October 2023 is Rs 1,72,003 crore, out of which Rs 30,062 crore is Central GST, Rs 38,171 crore is State GST, Rs 91,315 crore (including Rs 42,127 crore collected on import of goods) is Integrated GST, and Rs 12,456 crore (including Rs 1,294 crore collected on import of goods) is cess.

The government has settled Rs 42,873 crore to CGST and Rs 36,614 crore to SGST from IGST.

The total revenue of the Centre and states in October after regular settlement is Rs 72,934 crore for CGST and Rs 74,785 crore for SGST.

NA Shah Associates Partner, Indirect Tax Parag Mehta said one of the reasons for the rise in collection is the time barring period for the 2017-18 fiscal.

“Spate of notices, anti-evasion drive, DGGST investigations etc. have led to substantial collections. Further, the period from September to December is a festive period where consumer spending is substantial on high-value items like real estate, vehicles, gold, and travel.

“The collections are bound to increase substantially again with the annual returns etc. for FY 2022-23 being filed,” Mr Mehta said.

Deloitte India Partner MS Mani said the remarkable growth in GST collections over the past few months is not only on account of the underlying strong economic factors but also due to the efforts of the tax authorities in deploying tools to compare data sets to determine short payment and evasion.

KPMG Indirect Tax Head and Partner Abhishek Jain said a mid-year collection of such an increased number is definitely worth a cheer, and the ongoing festivities-driven consumption could help this continue.

EY Tax Partner Saurabh Agarwal said with the stable collection, the government can now consider rate rationalisation as the next task.
 

New Delhi:

GST collections grew by 11 per cent to over Rs 1.59 lakh crore in August on the back of improved compliance and reduced evasion, with experts forecasting higher mop-up to continue in the upcoming festive season.

The gross GST revenue collected in August 2023 is Rs 1,59,069 crore of which Central GST is Rs 28,328 crore, State GST is Rs 35,794 crore, Integrated GST is Rs 83,251 crore (including Rs 43,550 crore collected on import of goods) and cess is Rs 11,695 crore (including Rs 1,016 crore collected on import of goods).

“The revenues for the month of August 2023 are 11 per cent higher than the GST revenues in the same month last year. During the month, revenue from import of goods was 3 per cent higher and the revenues from domestic transactions (including import of services) are 14 per cent higher than the revenues from these sources during the same month last year,” the Finance Ministry said in a statement.

The Goods and Services Tax (GST) collection was over Rs 1.43 lakh crore in August 2022.

Revenue Secretary Sanjay Malhotra said GST collections have grown more than the nominal GDP growth rate in the April-June quarter despite no increase in tax rates.

“This is because of better compliance and improved tax collection efficiency,” Malhotra said, adding tax evasion and avoidance too have been low.

Separately, the government also launched the ‘Mera Bill Mera Adhikaar’ app to incentivise customers to seek bills while making purchases. The Centre and states have together set aside a Rs 30 crore corpus for the remaining months of this fiscal for the reward scheme.

The scheme would help increase compliance behaviour among customers and help cut down on evasion as once an electronic bill is generated, the sales and the GST collected on such bills will be captured in the backend system of GST Network.

The scheme was launched on a pilot basis on Friday in 6 states and UTs — Assam, Gujarat & Haryana and UTs of Puducherry, Dadra Nagar Haveli and Daman & Diu.

“Going forward we’ll implement this scheme across India on the basis of the outcomes and learnings from this pilot scheme,” Malhotra said.

Under the scheme every month there will be 810 lucky draws. The draws include 800 lucky draws of GST invoices of prize value of Rs 10,000 and 10 draws with a prize of Rs 10 lakh each.

Besides, there will be 2 bumper lucky draws of Rs 1 crore each in a quarter.

In a statement, the Finance Ministry said there were more than 1.51 lakh downloads of Mera Bill Mera Adhikaar app with the active participation of consumers in the pilot scheme on the first launch of launch.

Haryana Deputy Chief Minister Dushyant Chautala said, “A corpus of Rs 30 crore has been made available towards the fund under this initiative on an annual basis”.

KPMG Partner and National Head Indirect Taxes Abhishek Jain said with the approaching festive season GST collections are expected to be better in the coming months.

Deloitte India Partner M S Mani said these GST collections, coming in the backdrop of the good GDP growth in the first quarter heralds the onset of the festive season where consumption increases occur. The increase in the collections arising from domestic transactions being 14 per cent higher than last year also supports the other economic data.

“All the key manufacturing and consuming states have shown an increase ranging from 10 to 23 per cent indicating that the overall increase in domestic consumption is fairly widespread across states,” Mani added.

ICRA Chief Economist, Aditi Nayar said the headline GST number is marginally lower than our forecast, dampened by imports. “However, the overall collections so far this year remain robust.

EY Tax Partner Saurabh Agarwal said the steady increase in revenue not only reflects a resurgence in consumer demand but also underscores the government’s ongoing efforts to boost capital expenditure, which, in turn, is encouraging private investment.

“Nonetheless, it’s worth noting that future growth prospects may be tempered by factors such as below-par monsoon conditions, elevated inflation, and higher interest rates,” Agarwal said.