GST on Electricity in Commercial Property: Hidden Tax Trap You May Miss!
“Electricity is tax-free, right?” Not if you’re renting out commercial space and charging separately for it!
GST Kicks In When...
The landlord is GST-registered.
Electricity charges are billed separately from rent.
The rate isn’t the actual DISCOM rate or is marked up.
→ Then it’s a taxable supply — GST @18% applies!
GST Doesn’t Apply If...
Actual DISCOM rates are reimbursed at cost.
It qualifies under the pure agent model (stringent conditions!).
Electricity is part of a composite rent package and just incidental.
Best Practices to Stay Compliant:
Define electricity terms clearly in lease agreements.
Raise invoices separately — with or without GST, as needed.
Retain copies of DISCOM bills & reimbursement proof.
Avoid any margin — or face GST on the entire amount.
In GST, how you bill matters more than what you bill for. Structure smart. Stay compliant.