GST on Electricity — Is Electricity Exempt from GST?

Updated: 3 June 2026 | CGST Act, 2017 | GST Council position as of June 2026

Electricity is outside the GST framework — it is not taxable under GST at all. The supply and distribution of electrical energy is specifically excluded from GST and kept under state jurisdiction (Seventh Schedule, Entry 53). Your electricity bill (for units consumed) does not carry any GST. However, GST applies to electrical equipment (12–28%), electrical installation and wiring services (18%), and AMC/maintenance (18%).

0% GST

On electricity supply — completely outside GST (not even exempt, but outside scope)
States levy their own electricity duty separately. No ITC claimable on electricity bills — a major cost for industry.

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No ITC on Electricity Bills: Since electricity is outside GST, no GST is charged on bills — which means there is no ITC to claim. This is an embedded cost for all businesses. Energy-intensive industries (steel, cement, aluminium, textiles) bear a cascading burden. Bringing electricity under GST remains a long-standing demand from industry bodies including CII, FICCI, and ASSOCHAM.

GST Status — Electricity Supply vs Related Services

Type of Supply	GST Status	ITC Available?
Electricity units consumed (kWh billing)	Outside GST	No (no GST charged)
Electricity transmission charges	Outside GST	No
Electricity distribution charges	Outside GST	No
State electricity duty / surcharge	State levy — not GST	No
Electrical installation / wiring services	18% GST	Yes (if for business)
AMC / maintenance of electrical systems	18% GST	Yes (if for business)
Electrical consultancy / engineering services	18% GST	Yes (if for business)

GST Rates on Electrical Equipment — HSN Code Reference

Equipment / Goods	HSN Code	GST Rate
Solar PV panels / modules	8541	12%
Solar inverters	8504	12%
Wind turbine generators	8502	12%
DG sets (diesel generator sets)	8502	18%
Transformers (industrial)	8504	18%
Switchgear / circuit breakers	8535/8536	18%
Electric motors	8501	18%
LED lights and fixtures	9405	12%
Air conditioners (1.5 ton and above)	8415	28%
Domestic fans	8414	18%
Electric cables and wires	8544	18%
Meters (energy meters)	9028	18%
Lithium-ion batteries (EV use)	8507	18%

Why Electricity Was Kept Outside GST

Three main reasons electricity remains outside GST:

1. Constitutional constraint: Entry 53, List II (State List), Seventh Schedule gives states exclusive power to tax electricity. Including it in GST would require a constitutional amendment and states' agreement — complex politically.

2. State revenue protection: Electricity duty is a significant revenue source for states. Several states levy 10-25% electricity duty on industrial consumers. Subsuming this into GST and sharing revenue through the formula was politically unacceptable.

3. Social pricing: Electricity tariffs are cross-subsidised — residential consumers pay less, industrial consumers pay more. GST would apply uniformly, disrupting this subsidy structure.

Diesel and Petroleum — Also Outside GST

Like electricity, diesel, petrol, ATF, crude oil, and natural gas are also outside the GST framework. These petroleum products were kept out at the time of GST implementation and remain so. The GST Council is empowered to bring them under GST but has not done so. As a result, businesses running captive power plants on diesel also cannot claim ITC on diesel fuel cost.

Frequently Asked Questions

Why is electricity not under GST in India?

Electricity is kept outside the GST framework because it is listed in Entry 53 of List II (State List) of the Seventh Schedule to the Constitution of India, which gives states the exclusive power to levy taxes on consumption or sale of electricity. When GST was introduced in 2017, petroleum products and electricity were deliberately kept outside GST to preserve state revenues and avoid complex constitutional amendments. States levy their own electricity duty (also called electricity tax) under their respective Electricity Duty Acts. This results in embedded cost for businesses since ITC on electricity charges cannot be claimed.

Can I claim ITC (input tax credit) on my electricity bill under GST?

No. Since electricity supply and distribution is outside the GST framework entirely, there is no GST charged on electricity bills. As a result, there is no ITC available on electricity bills — neither for manufacturers, traders, service providers, nor any other registered person. This is one of the major pain points for industry, especially energy-intensive sectors like steel, cement, aluminium, and paper, where electricity constitutes 20-40% of production cost. The embedded electricity cost cannot be recovered through ITC, effectively making it a cascading cost. Industry bodies have repeatedly demanded inclusion of electricity under GST.

Does GST apply to electricity used for industrial or commercial purposes?

No, the GST exemption on electricity applies uniformly regardless of end use — residential, commercial, or industrial. Whether you are a household consumer, a factory, a data centre, or a shopping mall, your electricity bill (for supply of electricity units consumed) does not attract GST. However, the charges for electrical equipment, installation services, maintenance contracts, and AMC services related to your electrical setup do attract GST at 12-18%. Only the actual units of electricity consumed (priced per kWh) remain outside GST.

What is the GST rate on solar panels and solar power projects?

Solar photovoltaic (PV) panels and modules attract GST at 12% (HSN 8541). Solar power EPC (Engineering, Procurement and Construction) contracts and solar system installation services also attract 12% GST. Solar inverters attract 12% GST. However, solar power generation itself — the electricity generated and sold from a solar plant — is outside GST, just like conventional electricity. The GST Council has kept solar energy generation equipment at 12% (reduced from 5% following the change in classification). Rooftop solar installers charge 12% GST on the project cost.

What is the GST on a captive power plant — generator set and diesel?

For a captive power plant: DG sets (diesel generator sets) attract GST at 18% (HSN 8502). Diesel fuel itself is outside GST — it is a petroleum product that has not been brought under GST (along with petrol, ATF, and natural gas). The state levies VAT/sales tax on diesel. Electrical infrastructure (switchgear, transformers, cables) attracts 18% GST. Maintenance services for DG sets attract 18% GST. The electricity generated and used internally by the captive plant is, again, outside GST. So you pay GST on the equipment and services but not on the actual power generated or consumed.

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