CBIC issued clarification on GST implications for Electricity Charges

The Central Board of Indirect Taxes and Customs (CBIC) has clarified that when power charges are combined with the rental of immovable property and/or the maintenance of premises, it is deemed a composite supply and is subject to the 18% GST (Goods and Services Tax). This is true even if the electricity is charged separately. However, where the power charges are recovered as a pure agent by real estate owners, real estate developers, and so on, it will not be included in the value of supply.

The question of whether GST is levied on reimbursement of electricity prices received by real estate corporations, malls, airport operators, and others from their lessees/occupants remained unresolved.

In this regard, the Central Board of Indirect Taxes and Customs (CBIC) has clarified that where the provision of electricity is combined with the rental of immovable property and/or the upkeep of premises, it constitutes composite supply and must be taxed accordingly, whether billed separately or not.

In other words, the 18% GST rate on the primary supply of renting out immovable property would be extended to the supply of energy.

However, where the power charges are recovered as a pure agent by real estate owners, residential welfare societies, real estate developers, and so on, it will not be included in the value of supply. Even if the above individuals charge electricity on an actual basis, they are still considered to be functioning as a pure agent for the said supply.

Even if energy is billed separately, power supplied in conjunction with the rental of immovable property and/or the maintenance of premises is considered a composite supply and is liable to GST at 18%.

If real estate owners, Residential Welfare Associations (RWAS), or real estate developers deliver power, it will not be considered part of the value of supply if they recoup these charges on a pure agency basis or based on actual charges levied by the electrical boards.