Supply of Water as a part of Maintenance Service despite Separate Contract, GST applicable: AAR [Read Order]

The Rajasthan Authority of Advance Ruling (AAR) ruled that supply of water as a part of maintenance service despite separate contracts and the Goods and Services Tax ( GST ) would be applicable for such supplies.

The applicant, Latest Development Advisory Ltd. is engaged in providing services to the society Resident Welfare Association (RWA) in two parts namely all services of maintenance (other than supply of water) and supply of water.

A general practice across trade and market, the maintenance services are inclusive of supply of water and hence the supply of water provided by the applicant through a separate agreement raises a suspicion in its activity. The reason behind the suspicion is that the water received by the society (RWA) is used for multiple purposes i.e. for gardens, washing cleaning, swimming pool and for the use in the apartments, etc. and is stored in the common underground water tank which is maintained by the society Resident Welfare Association (RWA).

Consequently, the applicant tried to split the Contract into Contract I and II to avoid the Goods and Service Tax (GST) to facilitate Society  Resident Welfare Association  (RWA) in order to keep the maintenance charges paid by the residents.

The legal question raised was whether the applicant is required to pay GST on water charges collected from the customers for the supply of water under Contract II?

The authority composed of members J.P. Meena and Hemant Jain ruled, “Contract-I and Contract-II appears to be directly linked with each other as there is no case of direct supply of water by the applicant to the individual residents of the society, therefore, the applicant is required to pay GST as applicable on Contract-I”

“We also observe that water charges collected from the individual residents are on the basis of per Square feet (size of the flat), instead of per tanker of water, which is similar to the collection of maintenance charges collected by the Resident Welfare Association (RWA),” the authority said.