GST on Supply to a Resident Welfare Association (RWA) : AAR, Rajasthan ruling to M/s. Latest Developers Advisory Ltd.

[Ganeshan Kalyani]

IN RE: M/S. LATEST DEVELOPERS ADVISORY LTD. [2020 (4) TMI 234 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN]

The applicant M/s. Latest Developers Advisory Ltd., 3rd Floor, Apex Mall, Tonk Road, Lal Kothi, Jaipur, Rajasthan 302015, filed application before the Authority for Advance Ruling, Rajasthan seeking advance ruling on whether GST is required to be paid on water charges collected from the customers (individual residents of a society) for supply of water under Contract II?

The applicant is not registered under GST. He has obtained temporary user id from GST for the purpose of filing the present advance ruling application. The applicant proposes to engage into the business of providing maintenance service to housing societies under an agreement with the society referred to as 'Contract I'. The applicant will also be supplying water to individual society members for their personal use under an agreement referred to as 'Contract II'. The applicant is ready to charge GST on 'Contract I'. However, his question is as regard the applicability of GST on 'Contract II'.

The applicant makes his submission by stating that water being an item  movable in nature qualifies as goods as defined u/s 2(52) of CGST Act, 2017. The applicant procures the water in water tanker from another vendor and supply the same to the customer 'as such'. Since the water is supplied in a water tanker it does not fall under exclusions given in the said definition of goods viz. aerated, mineral water etc. Hence, the supply of water under 'Contract II' should be exempted from the levy of GST.

The applicant also submits that even if it is assumed that there involves a supply of service in addition to supply of goods, the main supply of water being an exempt supply the supply of service also gets exempted.

Findings and analysis of the authority:

The authority refers the definition of 'goods', u/s 2(52) of CGST Act, 2017 and concludes that the supply of water is supply of goods. The authority finds that the applicant has entered into two agreement namely, Contract I with the society and Contract II with the individual society members of the same society.

The authority also observes that the society charges GST on the maintenance collected from its member who pays more than ₹ 7,500/- per month. The authority refers to the entry no.77 of the Notification no.12/2017-CTR dated 28.06.2017 which exempts GST on the maintenance of up to ₹ 7,500/- per month collected by the society from its member. The authority also refers to the Circular no.109/28/2019-GST dated 22.07.2019 which clarifies as under:

"If aggregate turnover of an RWA does not exceed ₹ 20 Lakh in a financial year, it shall not be required to take registration and pay GST even if the amount of maintenance charges exceeds ₹ 7500/- per month per member. RWA shall be required to pay GST on monthly subscription/ contribution charged from its members, only if such subscription is more than ₹ 7500/- per month per member and the annual aggregate turnover of RWA by way of    supplying of services and goods is also ₹ 20 lakhs or more."

The text in the circular is tabulated as below:

Annual turnover of RWA	Monthly maintenance charge	Whether exempt?
More than ₹ 20 lakhs	More than ₹ 7500/-	No
	₹ 7500/- or less	Yes
₹ 20 lakhs or less	More than ₹ 7500/-	Yes
	₹ 7500/- or less	Yes

The authority finds it suspicious on the fact that the applicant has made two separate contracts viz. all services of maintenance (other than supply of water) and supply of water. The authority finds that in general practice across trade and market, the maintenance service includes supply of water also. Then why a separate contract is made for supply of water by the applicant.

It seems that the contract is split into two in order to escape the condition of ₹ 7,500/-  per month per member or the applicant might be crossing the threshold of ₹ 20 lakhs for registration under GST.

The authority further observes that a society has a common underground and overhead water storage tank. Therefore, it is not possible to supply water to each apartment separately. Also, the apartments do not have their own separate water storage tank. Therefore, it becomes clear that the supply of water is actually to the society. The applicant is trying to split the contract into two in order to avoid GST by facilitating the society to keep the maintenance below ₹ 7,500/-.

In nutshell, both the supply of maintenance service in Contract-I and supply of water in Contract-II are to the same society and relevant to each other.

Ruling:

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. Ruling passed on 07.02.2020.