2023 (3) TMI 1251 - AAR - GST

Taxability under GST - activities of water distribution system/water supply services being undertaken by the applicant - activity of the supply of water to the residents of this society is a taxable event or not under the GST Act, 2017? - Applicant is private limited company. HELD THAT - It is observed by the authority that as per the notification no. 12/2017 dated 28.06.2017, Pure Services (excluding works contract services) or other composite supplies involving supply of other goods provided to the local authority by way of any activity in relation to any function entrusted to municipality under article 243 W of the constitution of India are nil rated. Whereas the applicant is a Private Limited Company registered under the companies Act, 2013 and not entitled for the said exemption. In the issue at hand, the activity of water distribution system by the applicant to the residents of the Complex is covered under definition of business as enumerated above and it is a taxable supply. The scope of the supply under the GST Act is quite vast and encompasses all the supplies of goods and services which are not explicitly exempted by the government. The water distribution system is an independent business enterprise and here in the present case it is part of business activities of the applicant. It can also be said that it is a supply which is being done by the applicant for the furtherance of business - it can be construed that for any supply to be covered under the Pure Services that there should be no supply of goods, the recipient should be Central government/State government/Union territory/ Local Authority and services should be by way of any activity in relation to any function entrusted to a panchayat under article 243G of the constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution. Thus, the activity undertaken by the applicant cannot be considered as Pure Services which has been mentioned at serial no. 3 in the Notification No. 12-CT(R) dated 28.06.2017 wherein the services are nil rated. No doubt, the supply of water supply/water distribution system by the Municipal Committee / Panchayat/Local Authority or by any Government agency is exempted under the provisions of the GST Act, 2017. It is also to be noted unless there is any express/explicit option is given in the exemption notification by the Government, the concessional or exempted rate of tax cannot be availed by any taxpayer. And there is no such exemption given under the provision of the Act for the said activity to the residential societies - the activities of water distribution system/water supply services being undertaken by the applicant in the present case is a taxable supply under the CGST/HGST Act, 2017. Applicable HSN/SAC Code is 996921 (Water distribution Services) - Rate of GST to be charged on these services is 18%.

Summary

Issues:
- Applicant's eligibility for seeking an advance ruling
- Whether the activities mentioned are covered under the GST Act
- HSN/SAC Code for the covered activities
- Rate of GST to be charged on the services

Applicant's Eligibility for Seeking an Advance Ruling:
To file an application before the Authority of Advance Ruling, the applicant must meet the conditions under the CGST Act, 2017 and HGST Act, 2017. The applicant satisfied the conditions and paid the applicable fees, making them eligible to seek an Advance Ruling. The case proceeded for a hearing on the merits of the issue.

Activities Covered Under the GST Act:
The applicant, a Pvt. Ltd. company developing residential complexes, faced protests from residents regarding the applicability of GST on water supply activities. The Advance Ruling Authority examined the invoices and found that the applicant charged tax on most invoices, except in cases where residents refused to pay. The issue raised by residents led to a writ petition, but the proviso to Section 98(2) was deemed inapplicable as the applicant had not filed any appeal. The main issue was whether supplying water to residents constituted a taxable event under the GST Act.

Analysis of Relevant Legal Provisions:
The Authority analyzed various sections of the CGST Act, 2017 to determine the taxability of the water distribution system activity. The scope of supply under the Act includes all goods and services not explicitly exempted. The applicant's water distribution system was considered a taxable supply as part of their business activities. Exemptions under the Act did not apply to the applicant's case, making the activity subject to GST.

Conclusion and Ruling:
After thorough analysis, the Authority concluded that the water distribution services provided by the applicant were taxable under the CGST/HGST Act, 2017. The ruling provided answers to the applicant's queries: the activities were covered under the GST Act, the HSN/SAC code was 996921 (Water distribution Services), and the applicable rate of GST was 18%.

This detailed analysis of the judgment highlights the legal considerations, factual background, and the Authority's ruling on the taxability of the water supply activities under the GST Act.