2019 (9) TMI 1478 - AAR - GST

Classification of supply - composite supply or mixed supply - supply of water to individual units in the project under the MOU - whether separate supply of services or not - appropriate rate of GST - HELD THAT - In the instant case, it has been found that the applicant is providing services to the RWA in two parts viz. maintenance services and supply of water. It has also been observed that as a general practice across trade and market, the maintenance services is inclusive of supply of water and hence supply of water provided by the applicant through a separate agreement i.e. MOU in the present case, raises a suspicion in its activity. The reason behind the suspicion is that the water received by the RWA is used for multiple purposes i.e. gardening, washing, cleaning and for the use in the apartments etc. and is stored in the common underground water tank which is maintained by the RWA. The applicant have bifurcated the services provided to RWA in order to escape the condition of ₹ 7500/- per month per member or it might be crossing the GST registration threshold limit of ₹ 20 lakhs. The supply of water is actually to the RWA and the applicant is trying to split the contract into maintenance agreement and MOU to avoid the GST to facilitate RWA in order to keep the maintenance charges paid by the residents below ₹ 7500/- . Further, it has also been observed that water charges collected from the individual residents are on the basis of per sq feet (size of the flats), instead of per tanker of water, which is similar to the collection of the maintenance charges collected by the RWA - it is quite evident that supply of water in MOU and supply of maintenance services in maintenance agreement are to the same RWA and relevant to each other, hence it is evident that there is no case of direct supply of water by the applicant to the individual resident of the society.

Summary

Issues Involved:
1. Whether the supply of water to individual units in the project under the MOU is a separate supply of goods or a composite/mixed supply with that of maintenance services.
2. If such supply is a separate supply of goods, what is the appropriate rate of GST chargeable thereon.

Issue-wise Detailed Analysis:

1. Whether the supply of water to individual units in the project under the MOU is a separate supply of goods or a composite/mixed supply with that of maintenance services:

The applicant, a facility management entity, provides maintenance services for common areas in residential projects and charges GST for these services. The applicant also enters into a separate MOU with residents for the supply of water through tankers until the Haryana Shahari Vikas Pradhikaran (HSVP) develops the necessary infrastructure. The applicant argues that the supply of water under the MOU is separate from the maintenance services provided under the Maintenance Agreement.

However, the Authority observed that the water is supplied to the Residential Welfare Association (RWA) and then distributed to individual flats through common storage tanks. The supply of water, whether for maintenance activities or individual units, is from the same source and cannot be bifurcated. The Authority concluded that the supply of water and maintenance services are the same supply, and the applicant's attempt to bifurcate them is to avoid GST implications.

2. If such supply is a separate supply of goods, what is the appropriate rate of GST chargeable thereon:

The Authority noted that GST on services provided by RWAs to their members is 18% if the monthly charges exceed ?7500 per unit and the annual turnover exceeds ?20 lakhs. The applicant's attempt to separate the water supply from maintenance services is seen as an effort to keep charges below this threshold to avoid GST. The Authority found that the water charges collected are based on the size of the flats, similar to maintenance charges, indicating that the supply of water is not separate from maintenance services.

Ruling:

The Authority ruled that the Maintenance Agreement and MOU are directly linked, and there is no case of direct supply of water by the applicant to individual residents. The supply of water to individual units is not different from the supply of water for maintenance services. Therefore, the applicant is required to pay GST as applicable on maintenance services.