Issue involved
Determination of liability to pay tax on supply of water under contract.
Fact of the cases:
The Applicant, being an unregistered person, first obtained a temporary ID for the purpose of filing the Present Advance Ruiling.
The applicant proposes to engage in business of providing maintenance service with Housing Society/Individual customers(RWA) for which he will enter into an agreement (Contract 1).The maintenance services includes services for common areas maintenance and applicant levies GST on the provision of such services.
The applicant also submitted that
– he is gonna enter into a contract –II with residents of society to supply water. The applicant also submitted the draft copy of Contract-II before the AAR.
– in the course of contract-II, he will purchase water tank from vendors and will supply the same to the residents of the society (RWA) as such without any processing on water purchased.
– he may collect water charges based on the sq. Feet area occupied by the individual customer and will accordingly issued an invoice as there will no sub-meter.
– in terms of Notification No 02/2017 dated 28.06.2017, the proposed supply is exempt from levy of GST.
– though we are not admitting that there is supply of services in Contract II but if it’s assumed, that is composite supply, than supply would be a composite wherein supply of water being the principal supply, not liable to be taxed under GST.
AAR observation:
We first need to examine whether water is goods or not. Since water is movable goods, this qualifies as goods as defined u/s 2(52) of CGST Act.
We further observe that applicant is providing service to the society in two parts viz. Service of maintenance and Supply of water.
And there is general practice across trade to provide that maintenance service is inclusive of supply of water and hence supply of water through a separate agreement raises a suspicion in its activity.
They further said that reason behind the suspicion is that water received by RWA is used for multiple purposes including gardening, washing, cleaning, swimming pool and for the use of apartment etc. And store in common water ground tank.
In view of the above, RWA seems to split the service contract into two parts in order to escape the condition of Rs. 7500 per member per month or RWA might be crossing the threshold limit of Rs. 20 Lakh as given in Notification No 12/2017-Central Tax Rate dated 28.06.2017.
AAR further observed that water charges are collected from the residence member’s on the basis of the per square feet (flat size), instead per tanker of water, which is similar to collection of maintenance charges collected by RWA.
In view of the above, it’s quite evident that supply of water in Contract II and maintenance service in Contract-I are same to the society and relevant to each other, hence there appears no case of direct supply of water by the applicant to the individual residents of society (RWA).
AAR Ruiling:
Contract-I and Contract II appears to be directly linked to each other as there is no case of direct supply of water by the applicant to the individuals residents of the society, therefore applicant is required to pay GST on Contract –II as applicable in Contract-I.
Note: It’s also important to understand AAR implication and it’s binding only on the person who has sought it and on the concerned officer in respect of the applicant. (Section 103 of the CGST Act)
An appeal against this order lies before the Appellate Authority for Advance Ruiling constituted under Section 99 of CGST Act 2017, with in a period of 30 days from the date of service of Advance order.
Legal Provision discussed:
1. Definition of Goods given u/s 2(52) of CGST Act 2017: goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
2. Notification No 2/2017-Central Tax Rate dated 28.06.2017 which provides for an exemption in respect of certain intra-state supplies as under:
| Sr. No | Chapter, Sections Heading, Group or Service Code (Tariff) | Description of goods | Rate
(%) |
Condition |
| 99 | Heading 2201 | Water [other than aerated, mineral, purified, distilled, medicinal, ionic, battery, demineralised and water sold in sealed container] | Nil | NIl |
3. Notification No 12/2017-Central Tax Rate dated 28.06.2017 which provides for an exemption from levy of GST in respect of services provided by Resident welfare society (RWA) to its residents members when contribution from each society members does not exceed Rs. 7500 pm and supplier of services is registered by way of crossing the threshold limit of Rs. 20 Lakh.
| Sr. No | Chapter, Sections Heading, Group or Service Code (Tariff) | Description of goods | Rate
(%) |
Condition |
| 77 | Heading 9995 | Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution –
(a) as a trade union; (b) for the provision of carrying out any activity which is exempt from the levy of Goods and service Tax; or (c) up to an amount of Seven thousand Five Hundred rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex. |
Nil | Nil |
4. Circular No 109/28/2019-GST dated 22.07.2019 issued by CBIC clarified on the applicability of GST on services provided by RWA. The relevant extract is reproduced as follows:
| Sr. No | Issue | Clarification |
| 1 | Are the maintenance charges paid by residents to the Resident Welfare Association (RWA) in a housing society exempt from GST and if yes, is there an upper limit on the amount of such charges for the exemption to be available? | Supply of service by RWA (unincorporated body or a non- profit entity registered under any law) to its own members by way of reimbursement of charges or share of contribution up to an amount of Rs. 7500 per month per member for providing services and goods for the common use of its members in a housing society or a residential complex are exempt from GST |
| 2 | A RWA has aggregate turnover of Rs.20 lakh or less in a financial year. Is it required to take registration and pay GST on maintenance charges if the amount of such charges is more than Rs. 7500/- per month per member? | No. If aggregate turnover of an RWA does not exceed Rs.20 Lakh in a financial year, it shall not be required to take registration and pay GST even if the amount of maintenance charges exceeds Rs. 7500/- per month per member.
RWA shall be required to pay GST on monthly subscription/ contribution charged from its members, only if such subscription is more than Rs. 7500/- per month per member and the annual aggregate turnover of RWA by way of supplying of services and goods is also Rs. 20 Lakhs or more. |
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