18% GST on Flow Meter Maintenance: AAR Rejects 'Composite Supply' Claim, Denies Nil Rate Benefit [Read Order]
The AAR ruled that the maintenance of flow meters is classifiable under SAC 9987 and is liable to GST at 18% (9% CGST + 9% SGST). The nil rate applicable to the recycled water cannot be extended to the maintenance charges
AAR, GST, Flow Meter Maintenance
AAR, GST, Flow Meter Maintenance
The Andhra Pradesh Authority for Advance Ruling (AAR) has ruled that maintenance charges for flow meters do not form a composite supply with the supply of recycled water and are therefore taxable at 18%.
M/s Greater Visakhapatnam Smart City Corporation Limited (GVSCCL), the applicant, filed an application for Advance Ruling under Section 97 of the CGSTAct, 2017. The applicant sought a ruling on whether the maintenance charges for flow meters, installed at the premises of Hindustan Petroleum Corporation Limited (HPCL), constitute a composite supply with the supply of recycled water, which is nil-rated.
The applicant, which supplies recycled water to HPCL under a tripartite agreement, contended that the supply of water is the principal supply and the maintenance of meters is an ancillary activity. They argued that these services are naturally bundled and supplied in conjunction, and therefore the maintenance charges should also be liable at the nil rate applicable to the principal supply.
The Authority, comprising Shri K. Ravi Sankar and Shri B. Lakshmi Narayana, analyzed the agreement and the definition of 'composite supply' under Section 2(30) of the CGST Act. The Authority observed that the tripartite agreement explicitly separates the consideration for the supply of recycled water from the maintenance charges, which are levied separately at a rate of 0.75% of the monthly bill. It noted that the maintenance of flow meters is a distinct service that can be provided independently by any third party and is not integral to the supply of water itself.
The AAR concluded that because the maintenance charges are separately priced and not naturally bundled with the water supply, they do not meet the criteria of a 'composite supply'. The supply of recycled water remains a principal supply, but the maintenance service is an independent, standalone supply.
Consequently, the AAR ruled that the maintenance of flow meters is classifiable under SAC 9987 and is liable to GST at 18% (9% CGST + 9% SGST). The nil rate applicable to the recycled water cannot be extended to the maintenance charges.
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