01 November 2023 | Taxation

The CBIC has made a significant announcement regarding the inclusion of electricity charges in the Goods and Services Tax (GST) when bundled with rent or maintenance fees by real estate companies, malls, and airport operators. This marks a notable change, as electricity was previously not subject to GST.

The CBIC clarified that when electricity is provided alongside renting or maintenance services, it’s considered a composite supply. In such cases, the principal supply is renting or maintenance, and the entire package, including electricity, will now be subject to a GST rate of 18 percent. An exception applies to real estate owners, Resident Welfare Associations (RWAs), or real estate developers who charge for electricity at the same rate as State Electricity Boards or DISCOMs. In these cases, they are considered “pure agents,” and the cost of electricity won’t be included in the value of their supply. This has raised questions about the classification of electricity in a composite supply, considering that electricity is typically exempt from GST.