GST on Electricity Supply: A Complete Guide You Should Know

Introduction

Goods and Services Tax (GST) is a broad indirect tax system in India with four rate slabs—5%, 12%, 18%, and 28%—applicable to the supply of goods and services. Under GST, goods include movable property, crops, and actionable claims, but exclude money and securities. Since electricity is classified as a movable property, its supply is treated as a supply of goods. Many taxpayers often question whether electricity is taxable under GST or exempt. This article delves into GST on electricity charges, its relevant HSN code, and how it is regulated within the GST framework

What is GST on Electricity Charges?

GST on electricity charges refers to the application of Goods and Services Tax on the supply of electricity, which is classified as movable property under GST laws. However, the supply of electricity to consumers is currently exempt from GST since it is considered an essential service. Conversely, related services like construction, installation, or maintenance of electrical infrastructure may attract GST at the applicable rates. It is important for taxpayers to understand this distinction to correctly identify which aspects of electricity supply are taxable and which are exempt

Benefits of Including Electricity under GST

If electricity were brought under GST, several benefits would arise, including:

Input Tax Credit for Businesses: Businesses could claim input tax credit on electricity, lowering their overall production costs and benefiting sectors such as manufacturing.
Improved Price Competitiveness: Access to input tax credit helps businesses reduce costs, enhancing their competitiveness in domestic and international markets.
Simplified Tax Structure: GST inclusion would consolidate multiple state-specific charges into a unified tax, reducing compliance complexity.
Shared Revenue Between Centre and States: GST revenue from electricity supply would be shared between the central and state governments, promoting equitable distribution.
Elimination of State-Level Taxes: State-specific electricity taxes and surcharges would be removed, simplifying administration for both taxpayers and authorities

GST Treatment on Electricity Supply

Residential Properties: Electricity charges for residential properties are exempt from GST. Since rental services for residential units are exempt, electricity charges—whether billed separately or included—are not taxable.
Commercial Spaces: When electricity supply is bundled with rental or maintenance services in commercial properties (like malls or airports), it forms a composite supply. GST is applied on the principal supply—usually renting or maintenance—at 18%, and this rate covers the entire bundled service including electricity charges.
Pure Agent Scenario: Real estate developers, Resident Welfare Associations (RWAs), or property owners recovering electricity charges as a pass-through cost from tenants are considered pure agents. Since the amount is directly passed to electricity providers (DISCOMs or state boards), GST is not levied on these recoveries

HSN Code for Electricity

The Harmonized System of Nomenclature (HSN) code for electricity is 2716. This code is used for classification and invoicing under GST regulations.

HSN Code	Description	GST Rate
271600	Electrical energy (Electricity Bill)	0%
27160000	Electrical energy (Electricity Bill)	0%

About the Author

Rohan

Rohan is a skilled content writer specializing in business registration, tax laws, trademark regulations, and company compliance. His well-crafted articles provide clear, practical guidance that helps businesses effectively navigate and tackle complex legal and regulatory issues

May 31, 2025

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