Regarding the imposition of Goods and Services Tax (GST) on the provision of electricity by real estate firms, shopping malls, airport operators, and similar entities to their tenants or occupants, the Central Board of Indirect Taxes and Customs (CBIC) has issued this clarification in line with the GST Council’s recommendations dated October 31, 2023.
The board has clarified that when electricity is supplied in conjunction with the rental of immovable property and/or the maintenance of premises, it constitutes a composite supply and is subject to taxation accordingly. In this scenario, the primary supply is the rental of immovable property and/or maintenance of premises, as applicable, while the supply of electricity is considered ancillary. Even if the electricity is billed separately, these supplies remain a composite supply, and, therefore, the tax rate applicable to the principal supply, i.e., the GST rate for renting of immovable property and/or maintenance of premises, applies.
However, in cases where real estate owners, Resident Welfare Associations (RWAs), or real estate developers supply electricity as a “pure agent,” the value of this electricity supply is not included in their overall value for taxation. Furthermore, if they charge for electricity on an actual basis, which means they charge the same amount for electricity as they are charged by the State Electricity Boards or DISCOMs, they are considered to be acting as a “pure agent” for this particular supply.
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