An issue persisted on whether GST is leviable on reimbursement of electricity charges received by real estate companies, malls, airport operators etc, from their lessees/ occupants.
In this regard, the Central Board of Indirect Taxes and Customs (CBIC) has clarified that where the supply of electricity is bundled with renting of immovable property and/or maintenance of premises, it forms part of composite supply and shall be taxed accordingly, whether or not billed separately. In other words, the Goods and Services Tax (GST) rate on the principal supply of renting of immovable property which is 18% will also extend to the electricity supply.
However, where the electricity charges are recovered by real estate owners, residential welfare associations, real estate developers, etc, as a pure agent, it will not form part of the value of supply. In cases where the above persons charge electricity on actual basis, they will still be deemed to be acting as a pure agent for the said supply.
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The two key clarifications are:
- Electricity supplied alongside renting immovable property and/or maintenance of premises is considered a composite supply and subject to GST at 18%, even if electricity is billed separately.
- If electricity is supplied by real estate owners, Residential Welfare Associations (RWAs) or real estate developers, it will not be considered part of the value of supply, if they recover these charges on a pure agent basis, or based on actual charges by the electricity boards.
