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2023 (8) TMI 1298 - AAR - GSTTaxability - Supply of raw water and its incidental charges - Maintenance charges for usage of common facilities - Participatory Infrastructure Development Scheme (PIDP) charges - interest collected towards delayed payment for Upfront lease premium and Differential lease premium - interest for delayed payment of consideration (as mentioned above) - Penalty for delay in execution of the project and delay in execution of lease deed. Whether the Supply of raw water and its incidental charges are liable to be taxed under the prevailing GST Laws? - HELD THAT - The raw water supplied by the Applicant to the industrial units is exempted under entry no. 99 of exemption notification No. 02/2017-CT(Rate) dt. 28.06.2017 - Regarding the incidental charges collected from the allottees such as Interest for delay in payment obligations (Water Charges), Penalty for delay in payment obligations (Water Charges), it is observed that when the principal supply of raw water is exempted, recovery of interest or penalty for delayed payment of water charges and Reconnection charges are not liable to tax, as clarified in Para No. 9 of circular No. 178/10/2022 - GST dt. 03.08.2022, issued by the Department of Revenue. Whether the Maintenance charges for usage of common facilities are liable to be taxed under the prevailing GST Laws? - HELD THAT - In as much as the Applicant has not submitted any documents as required in the Rule/definition of pure agent discussed above, i.e any document such as agreement entered into with the Allotee(s) to act as Pure agent, to incur expenditure or costs, in the course of supply of goods or any other document in support of their claim; the charges collected cannot be treated as reimbursable even if it is only a reimbursement of actual cost - as per provision of Section 7(1) (a), the activity of collecting Maintenance charges for usage of common facilities, would fall in category of supply. A transaction which is incidental or ancillary to sub-clause (a) falls under the scope of sub-clause (b) of Section 2(17) of CGST Act, 2017. The provisions of sections 7(1)(a) of CGST Act, 2017 read with clause (b) of section 2(17) of CGST Act, 2017 indicates that the activities of the appellant would fall under the definition of supply hence chargeable to GST. It is observed that there may be transfer of property in goods and/or services in the course of maintenance of the aforesaid amenities/ buildings which is made against a consideration. Therefore, these activities fall under the scope of supply envisaged under Section 7 of the GST Act and hence liable for GST @ 18% under SAC 995429 vide SI. No. 3 of Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017. Whether the Participatory Infrastructure Development Scheme (PIDP) charges are liable to be taxed under the prevailing GST Laws? - HELD THAT - The provisions of sections 7(1) (a) of CGST Act, 2017 read with clause (b) of section 2(17) of CGST Act, 2017 indicates that the activities of the appellant would fall under the definition of supply hence chargeable to GST - the activity of rendering infrastructure works as described above, whether on request from the allottee(s) on their own, there may be transfer of property in goods and/or services in the course of upgradation/renovation or reconstruction of the aforesaid structures/ buildings which is made against a consideration. Therefore, these activities fall under the scope of supply envisaged under Section 7 of the GST Act and hence liable for GST @ 18% under Group 99859 (other support services) vide SI. No. 23(iii) of Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017. Whether the interest collected towards delayed payment for Upfront lease premium and Differential lease premium are liable to be taxed under the prevailing GST Laws? - HELD THAT - When the principal supply itself is exempted, the interest collected towards delayed payment for Upfront lease premium and Differential lease premium are not liable to be taxed under GST Act, as clarified in Para No. 7.1.6 of Circular No. 178/10/2022 - GST dt.03.08.2022, issued by the Department of Revenue. Whether the interest for delayed payment of consideration for the points ( as mentioned above), are liable to be taxed under the GST Laws? - HELD THAT - For Supply of raw water and its incidental charges, when the principal supply of raw water is exempted, recovery of interest or penalty for delayed payment of water charges and reconnection charges are not liable to tax, as clarified in Para No. 9 of Circular No. 178/10/2022 - GST dt. 03.08.2022, issued by the Department of Revenue. Maintenance charges for usage of common facilities and Participatory Infrastructure Development Scheme (PIDP), the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply. In as much as the principal supply i.e maintenance service and PIDP are taxable, interest and penalty collected towards rendering such services will also form part of the value of supply and liable to be tax appropriately in consonance with the principal supply. Whether the Penalty for delay in execution of the project and delay in execution of lease deed are liable to be taxed under the prevailing GST Laws? - HELD THAT - Since the main supply i.e the upfront fee collected is exempted as per entry no. 41 of Notification No. 12/2017- CT (Rate) dt. 28.06.2017, penalty for delay in execution of the project and delay in execution of lease deed are not liable to be taxed under the prevailing GST Laws.
Issues Involved:
1. Taxability of Supply of raw water and its incidental charges. 2. Taxability of Maintenance charges for usage of common facilities. 3. Taxability of Participatory Infrastructure Development Scheme (PIDP) charges. 4. Taxability of interest collected towards delayed payment for Upfront lease premium and Differential lease premium. 5. Taxability of interest for delayed payment of consideration for the points mentioned in Sr.No. 01 to 03. 6. Taxability of Penalty for delay in execution of the project and delay in execution of lease deed. Summary: I. Supply of Raw Water and Incidental Charges: The applicant supplies raw water without any treatment, which falls under Entry 99 of Notification No. 02/2017-CT(Rate) dt. 28.06.2017, exempting it from GST. Incidental charges like interest for delay in payment obligations, penalty for delay in payment obligations, and reconnection charges are also exempt, as clarified in Para No. 9 of Circular No. 178/10/2022 - GST dt. 03.08.2022. II. Maintenance Charges for Usage of Common Facilities: Maintenance charges collected for common infrastructure facilities are taxable at 18% under SAC 995429, as per SI. No. 3 of Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017. The applicant's claim that these charges are mere reimbursements and not taxable was rejected due to lack of supporting documents to qualify as a "Pure Agent" under Rule 33 of the CGST Rules. III. Participatory Infrastructure Development Scheme (PIDP) Charges: PIDP charges are taxable at 18% under Group 99859 (other support services) as per SI. No. 23(iii) of Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017. The applicant's claim that these charges are mere reimbursements was rejected due to lack of supporting documents to qualify as a "Pure Agent." IV. Interest for Delayed Payment for Upfront Lease Premium and Differential Lease Premium: Interest collected towards delayed payment for Upfront lease premium and Differential lease premium is not liable to be taxed under GST, as the principal supply is exempted under Entry No. 41 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, and clarified in Para No. 7.1.6 of Circular No. 178/10/2022 - GST dt.03.08.2022. V. Interest for Delayed Payment of Consideration for Points Mentioned in Sr.No. 01 to 03: Interest for delayed payment of consideration for raw water (Sr.No. 01) is not taxable, as the principal supply is exempt. However, interest for delayed payment of maintenance charges and PIDP charges (Sr.No. 02 & 03) is taxable, as the principal supplies are taxable. VI. Penalty for Delay in Execution of the Project and Lease Deed: Penalties for delay in execution of the project and lease deed are not liable to be taxed under GST, as the principal supply (upfront lease payment) is exempted under Entry No. 41 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017. Ruling: 1. Supply of raw water and its incidental charges are not liable to be taxed. 2. Maintenance charges for usage of common facilities are liable to be taxed. 3. PIDP charges are liable to be taxed. 4. Interest collected towards delayed payment for Upfront lease premium and Differential lease premium are not liable to be taxed. 5. Interest for delayed payment of consideration for raw water is not taxable, but for maintenance charges and PIDP charges, it is taxable. 6. Penalty for delay in execution of the project and lease deed are not liable to be taxed.
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