In re Prestige North West Country Owners Associations (GST AAR Karnataka)
The Authority for Advance Ruling, Karnataka, examined the GST implications on supply of unprocessed water by a residential owners’ association and whether such charges should be included in determining the GST threshold applicable to Resident Welfare Associations (RWAs). The applicant, an association responsible for maintenance and upkeep of a residential complex, collected maintenance charges and separate water charges from its members. The water was sourced from both borewells owned by the association and external vendors, and was supplied without any processing such as filtration or treatment. The charges were collected based on actual consumption and invoiced separately without markup.
The applicant contended that the supply of such unprocessed water was exempt under Entry 99 of Notification No. 2/2017, which provides a nil GST rate for water other than specified categories. It also argued that water charges constituted pure reimbursement and should not be included in the value of supply or aggregated with maintenance charges for determining the ₹7,500 per month threshold for GST applicability.
The Authority did not accept this interpretation. It observed that the exemption under Entry 99 applies only to supply of goods, whereas the applicant, being a registered association, provides services to its members. Under Section 7 of the CGST Act, transactions between an association and its members are deemed to be supplies between distinct persons. The activities of the association, including maintenance and provision of water, constitute a supply of services.
