Recovery of Water charges by Residence Association not Separate Supply of goods, Subject to GST if threshold Exceeded: AAR [Read Order]

The Authority for Advance Ruling (AAR) in Karnataka held that recovery of water charges by Resident Welfare Association (RWA) was not a separate supply of goods and would be subjected to Goods andService Tax (GST) if the threshold was exceeded.

The applicant, M/s Sandeep Vihar Owners Association, is an Apartment Owner’s Association duly registered under the Karnataka Societies Registration Act, 1960. The applicant is responsible for the security, housekeeping, and overall maintenance of the complex, including waste management, essential services, and the supply of potable water.

One of the issues on which the applicant sought advance ruling was whether the recovery of actual costs of water supplied through separate monthly debit notes was attracting GST despite water being generally exempted from tax. The applicant submitted that supply of water is exempt from GST under Entry No. 99 of Notification No. 02/2017-Central Tax(Rate) dated 28.06.2017.

It was observed that evidently the Association’s activities towards its members constitute a supply of services falling under the description “Services of Membership Organisations”. Additionally, it was noted that the Association is not selling water as goods to its members.

AAR concluded that this recovery is integrally linked to overall service of maintaining the residential complex and its common facilities. Therefore, it will be taxable only if the total monthly contribution per member exceeds the exemption limit prescribed in Entry 77.

The two member bench of Kalyanam Rajesh Rama Rao and Sivakumar S Itagi held that the recovery of water charges from members is considered part of the overall maintenance services and cannot be treated as a separate supply of water (goods). Thus, GST would be applicable in accordance with the ceilings specified in the said Notification.

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