Tax Focus 09 April 2020

Supply of water to the Owner’s Association (RWA) under a separate contract to be treated as part of Maintenance
Contract and chargeable to GST - AAR Rajasthan
  Facts

 Latest Developers Advisory Ltd. (‘the Applicant’) will enter into an agreement (‘the Contract I’) with the RWA for
providing Common Area Maintenance ('CAM') services
 The Applicant would also enter into a sperate contract (the Contract II') with the individual members for supply of water
for personal use  The Contract II will be optional and the Applicant will enter into such contract only with those members
who desire to procure water from the Applicant.
 Supply of water (other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized and water sold in
sealed container) is exempt from GST vide entry no 99 of Notification no 2/2017-Central Tax dated 28th June, 201
 Water supplied by the Applicant is tanker water and is not covered in any of the above mentioned exclusions form the
exemption (such as aerated, mineral water, purified water etc.)
  Issue before the Authority for Advance Ruling (‘AAR’)

Whether the Applicant is required to pay GST on water charges collected from the customers for supply of water under
the Contract II?
  Discussion and Findings of the AAR

 The Applicant is involved in two contracts where the Contract-I is for maintenance services provided to the RWA  the
Contract-II is for supply of water to the individual resident residing in the society
 GST on services provided by the RWA to its resident members is chargeable to GST @ 18% when:
 Each unit in the society pays more than INR 7500/- per month for said services; and
 Supplier of services (i.e. RWA in the present case) is registered on account of crossing threshold limit of INR 20
lakhs. (notified vide Notification no 12/2017-Central Tax (Rate) and further clarified in Circular no 109/28/2019-
GST)
 As a general practice across trade and market, the maintenance services is inclusive of supply of water and hence
supply of water provided by the Applicant through a separate contract raises a suspicion in its activity
 Further, water received by the society (RWA) is used for multiple purpose i.e. for gardens, washing cleaning, swimming
pool and for the use in the apartments etc. and is stored in the common underground water tank which is maintained by
the RWA as individual residents do not have their own separate water storage tanks. Thus, supply of water by the
Applicant is to the RWA but the contract seems to be routed through individual residents
 The Applicant seems to have bifurcated the services provided to the RWA in order to keep the maintenance charges
paid by the residents below the limit of INR 7500 per month per member
 Water charges collected from the individual residents are on the basis of per Square feet (size of the flat), instead of per
tanker of water, which is similar to the collection of maintenance charges by the RWA
 It is quite evident that supply of water in Contract-II and supply of maintenance services in Contract-I are to the RWA
and relevant to each other, hence there appears no case of direct supply of water by the Applicant to the individual
residents
 The Applicant is liable to pay GST on Contract II, as applicable on the Contract I.
In case any assistance is required in this regard, we would be happy to provide you the same.

Regards,
Reina Legal LLP

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