Unprocessed Water Supply in RWA attracts 18 % GST: AAR [Read Order]

The Karnataka Authority for Advance Ruling (AAR) has ruled that unprocessed water supply by a Resident Welfare Association (RWA) forms part of composite "Home Owners' Association services" and must be aggregated with maintenance charges for the Rs 7,500 monthly per member exemption threshold, making it taxable at 18% once exceeded.

M/s Prestige North West Country Owners Associations (PNWCOA), the applicant, filed an application for an Advance Ruling under Section 97 of the CGST Act, 2017. The applicant sought a ruling on whether recovery of unprocessed water charges from members (sourced from tankers on actual basis via separate invoices) qualifies as an exempt supply of goods under Entry 99 of Notification No. 02/2017-Central Tax (Rate), or as pure agent reimbursement under Section 15(3) read with Rule 33 CGST Rules, thereby excludable from the taxable value of maintenance services.

The applicant contended that water supply is a distinct exempt good (not aerated/mineral etc.), recovered purely as a pass-through without markup or title retention, satisfying pure agent conditions since bills are in the RWA's name but apportioned to members; thus, it should not aggregate with maintenance for the Entry 77 exemption threshold in Notification No. 12/2017-Central Tax (Rate).

The Authority, comprising Shri Kalyanam Rajesh Rama Rao and Shri Sivakumar S Itagi, analysed Section 7(1)(aa) (deeming RWAs and members distinct persons), the definition of supply/person under Sections 2(84)/7, and SAC 999598 for Home Owners' Association services.

The Authority observed that water recovery is integrally linked to overall maintenance/upkeep (not standalone goods sale), failing pure agent tests as no member authorisation/contract exists, RWA uses water for its obligations (e.g., common facilities), and holds title during procurement; separate invoicing does not segregate it from the principal composite supply.

The AAR concluded that water supply does not qualify for Entry 99 exemption (not independent goods) or pure agent exclusion, forming part of taxable Home Owners' Association services under SAC 999598; it aggregates for the Rs 7,500 threshold per Entry 77, with tax at 18% (9% CGST + 9% SGST) per Sl. No. 33 of Notification No. 11/2017-Central Tax (Rate) beyond that.

Consequently, the AAR ruled the water supply classifiable under SAC 999598, taxable at 18% post-threshold aggregation; the exemption under Notification No. 02/2017 does not extend, and Rule 33 conditions remain unfulfilled.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates