This paper presents the theory and simulation work to establish a relationship between Geomagnetically Induced Current (GIC) flowing through a transformer's windings and the reactive power absorbed by that transformer's core. This relationship is determined in laboratory for various levels of GICs injected under different loading conditions of a transformer. This obtained relationship validates the results obtained through electromagnetic transients simulation using PSCAD/EMTDC and also correlates well with actual field data. This study is one of the first laboratory simulation studies of the effect of GIC, reported in literature.