Electricity is outside the GST framework — the supply of electrical energy is not taxed under GST at all, so your electricity bill (for units consumed) carries no GST and there is no Input Tax Credit to claim on it. GST does apply to electrical equipment and services — for example wiring and AMC at 18%, and solar panels at 5% under the GST 2.0 rate schedule.
Electricity Supply vs Related Services
The actual units of electricity you consume are outside GST. Only the equipment and services around your electrical setup carry GST. Here is how each line item is treated.
| Type of Supply | GST Status | ITC |
|---|---|---|
| Electricity units consumed (kWh) | Outside GST | No GST charged |
| Transmission charges | Outside GST | No |
| Distribution charges | Outside GST | No |
| State electricity duty / surcharge | State levy | No |
| Electrical installation / wiring | 18% | Yes (business) |
| AMC / maintenance of electricals | 18% | Yes (business) |
| Electrical consultancy / engineering | 18% | Yes (business) |
Electricity supply rules were not changed by GST 2.0 (eff 22 Sep 2025) — it stays outside GST. Confirm service rates on the official GST portal before invoicing.
Electricity is placed outside the scope of GST altogether under Entry 53, List II of the Constitution — not merely exempted within it. In practice the result is the same for you: no GST on the bill and no ITC. Electricity distribution by a licensed DISCOM is also specifically exempt as a service, reinforcing this.
Why There Is No ITC on Your Electricity Bill
Because electricity is outside GST, no GST is charged on the bill — and with no GST charged, there is nothing to claim as Input Tax Credit. This turns power into an embedded cost that cannot be recovered, unlike most business inputs.
For sectors like steel, cement, aluminium, textiles and data centres, electricity can be 20–40% of production cost. Since none of it flows through as ITC, it becomes a true cost baked into the final price. Bringing electricity under GST is a long-standing demand of CII, FICCI and ASSOCHAM.
You still get GST credit on
- Wiring, cabling and switchgear installation (18%)
- AMC and repair of electrical systems (18%)
- DG sets, transformers and meters used for business (18%)
- Solar equipment for a business rooftop (5%)
You get no credit on
- The electricity units on your DISCOM bill
- Transmission and distribution charges
- State electricity duty and surcharges
- Diesel bought to run a captive generator
Unsure which of your electrical costs carry claimable GST?
Talk to a GST Expert →GST on Electrical Equipment — HSN Reference
While electricity is outside GST, the goods around it are taxed. The GST 2.0 reform (effective 22 September 2025) cut several of these rates — air conditioners moved from 28% to 18%, and solar and wind equipment moved from 12% to 5%.
| Equipment / Goods | HSN | GST Rate |
|---|---|---|
| Solar PV panels / modules | 8541 | 5% |
| Wind turbine generators | 8502 | 5% |
| LED lights, bulbs & battens | 9405 | 5% |
| Air conditioners | 8415 | 18% |
| DG sets (diesel generators) | 8502 | 18% |
| Transformers (industrial) | 8504 | 18% |
| Switchgear / circuit breakers | 8535/8536 | 18% |
| Electric motors | 8501 | 18% |
| Electric cables & wires | 8544 | 18% |
| Energy meters | 9028 | 18% |
| Lithium-ion batteries | 8507 | 18% |
Solar inverters and mounting structures are treated per the renewable-energy device schedule — verify the exact rate for your item on the GST portal, as classification can vary. See HSN/SAC rates.
If you run a captive DG set, the generator (18%), cabling and AMC (18%) carry GST you can claim as a business, but the diesel itself is outside GST (a petroleum product still not brought under GST), so there is no ITC on the fuel. The power the set generates and you consume is, like grid power, outside GST.
Installing solar or a captive plant? Get the GST and ITC treatment mapped first.
Get Expert Advice →Why Electricity Was Kept Outside GST
Three reasons keep electricity outside the GST net even under the 2025 reform:
- Constitutional constraint — Entry 53, List II (State List) of the Seventh Schedule gives states the exclusive power to tax the consumption and sale of electricity. Subsuming it into GST would need a constitutional amendment and states' consent.
- State revenue protection — electricity duty is a major state revenue source; several states levy 10–25% duty on industrial consumers, and states have resisted folding this into a shared GST pool.
- Social / cross-subsidy pricing — tariffs cross-subsidise households against industry; a uniform GST would disrupt that subsidy structure.
Petroleum products — diesel, petrol, ATF, crude oil and natural gas — sit outside GST for similar reasons, which is why captive power running on diesel also gets no fuel-side ITC.
- Electricity bill = no GST
- Electricity bill = no ITC
- Wiring & AMC services = 18% (claimable)
- Solar panels & modules = 5% (GST 2.0)
- Air conditioners = 18% (cut from 28%)
- Diesel for gensets = outside GST, no ITC
Frequently Asked Questions
Related TaxClue services
Getting Your Electrical & Energy GST Right
Electricity is outside GST, but the equipment, solar and services around it are not — and the credits matter. TaxClue's CA-led team maps your electrical spends, claims eligible ITC and files your returns — 100% online, across India.