A recent West Bengal advance ruling confirms that operators recovering electricity costs at actual rates from tenants, without markup, are exempt from charging GST, marking a significant clarifcation for property and facility management practices in India.
A West Bengal advance ruling has clarified that a commercial building operator recovering electricity costs from occupants at the same rate it pays the utility, and without any markup, will not have to charge GST on that amount. The ruling, issued on 1 September in the case of DH Maintenance Ltd, adds to a growing body of guidance on how India’s indirect tax regime treats pass-through electricity charges in property and facility management arrangements. According to Business Standard, the company manages common areas and facility services for a commercial building in Kolkata.
DH Maintenance had asked whether the electricity it buys from CESC and then recovers from tenants can be treated as reimbursement in the capacity of a “pure agent”, which would keep it outside the taxable value of its maintenance services. Under the company’s proposed billing model, electricity used in individual offices, including heating, ventilation and air-conditioning, would be billed through sub-meters, while common-area consumption would be shared between occupants in line with their super-built-up area. The company said it would recover only its actual outlay, with no profit element.
The West Bengal Authority for Advance Ruling relied on the GST department’s circular of 31 October 2023, which says that electricity supplied alongside renting or maintenance services is generally part of a composite supply, but can be treated differently when the charge is passed on at the exact amount paid to the distribution company. Tax specialists said the ruling is notable because the authority accepted that treatment even for common-area electricity. Harpreet Singh, a partner at Deloitte, told Business Standard that the decision restores the position on metered electricity recoveries and brings the ruling broadly into line with how many businesses already operate, although he said the common-area point may still be disputed.
The facts before the authority included a January 2026 CESC bill of Rs 20.19 lakh for 196,520 kilowatt-hours, split between office consumption, HVAC use and common areas. The revenue side argued that earlier proceedings involving the company for 2018-19 and 2019-20 had already raised similar issues, but the authority distinguished those cases because they concerned the existing billing method rather than the proposed one. Separately, other West Bengal advance rulings reported this year have also treated actual-cost electricity recoveries by landlords or lessors as pure-agent reimbursements, suggesting a wider administrative trend in favour of excluding pass-through power costs from GST when there is no markup.
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