Background
Following the recommendations of the 52nd GST Council Meeting, the CBIC has provided clarification regarding the applicability of GST on reimbursement received from lessees or occupants for the provision of electricity by entities such as real estate companies, malls, and airport operators.
Impact
Electricity charges received by entities such as real estate companies, malls, and airport operators from their lessees or occupants, will be subject to GST when electricity supply is bundled with the rental of immovable property and/or maintenance of premises. This inclusion in GST is applicable even if the electricity charges are billed separately. However, in cases where real estate owners, Resident Welfare Associations (RWA), or real estate developers act as pure agents in supplying electricity, it will not be considered a part of the value of the overall supply. Moreover, if these entities charge for electricity based on actual consumption, they will be treated as acting in the capacity of a pure agent for this particular supply.
The clarification emphasizes that when electricity is bundled with the leasing of immovable property or the maintenance of premises, it constitutes a composite supply, and GST will be levied accordingly. In such cases, the primary supply is considered to be the leasing of immovable property, with the supply of electricity being an ancillary component.
Even when electricity is invoiced separately, it is clarified that the transaction will still be treated as a composite supply, and therefore, the GST rate applicable to the principal supply—namely, the GST rate on leasing of immovable property or maintenance of premises—will be applicable.
It is highlighted that in instances where electricity is supplied by entities such as Real Estate Owners, Resident Welfare Associations (RWAs), or Real Estate Developers acting as pure agents, the value of this supply will not be included. Furthermore, if these entities charge for electricity based on actual consumption, mirroring the charges imposed by State Electricity Boards or DISCOMs, they will be considered to be acting as pure agents.
(CIRCULAR NO. 206/18/2023-GST [F.NO. CBIC-190354/195/2023-TO (TRU-II)-CBEC], DATED 31-10-2023)
