GST: Water Supply Tax Liability Determination

The case involved the applicability of a notification issued under the GST Act regarding the supply of water and the determination of liability to pay tax on services provided by the applicant. The applicant sought an advance ruling on whether the supply of water should be exempt from GST based on a specific notification. The authority found that the two contracts were directly linked, with no direct supply of water to individual residents, and ruled that the applicant is required to pay GST as applicable on the services provided under Contract I.

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Issues Involved:
1. Applicability of a notification issued under the provisions of the GST Act.
2. Determination of liability to pay tax on services provided by the applicant.

Issue-wise Detailed Analysis:

1. Applicability of a Notification Issued under the GST Act:
The applicant, M/S Latest Developers Advisory Ltd., seeks an advance ruling on whether the supply of water under Contract II is exempt from GST based on Notification No. 2/2017 - Central Tax Rate dated 28th June 2017. The notification exempts intra-State supplies of certain goods, including water, from GST, except for specified categories such as aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized, and water sold in sealed containers.

The applicant argues that water supplied under Contract II qualifies as "goods" under Section 2(52) of the CGST Act, which defines goods as every kind of movable property other than money and securities. Since the water supplied is not processed and falls outside the specified categories, the applicant contends that it should be exempt from GST.

2. Determination of Liability to Pay Tax on Services Provided by the Applicant:
The applicant proposes to engage in two types of contracts:
- Contract I: Providing maintenance services to housing societies, which includes Common Area Maintenance (CAM) and is subject to GST.
- Contract II: Supplying water to individual residents of the housing society, which the applicant claims should be exempt from GST based on the aforementioned notification.

The applicant maintains that the supply of water under Contract II is a separate transaction from the maintenance services under Contract I. They argue that even if Contract II involves both goods and services, it should be considered a composite supply where the principal supply (water) is exempt from GST, thereby making the entire supply exempt.

Findings, Analysis & Conclusion:

(a) Nature of Services and Goods:
The applicant provides maintenance services to housing societies under Contract I, which includes CAM and is subject to GST. Contract II involves purchasing water from vendors and supplying it to individual residents without any processing, which the applicant claims should be exempt from GST.

(b) Examination of Water as Goods:
Water qualifies as "goods" under Section 2(52) of the GST Act. The relevant notification exempts water from GST, except for specified categories. The applicant's supply of water does not fall into any of these categories, supporting their claim for exemption.

(c) Jurisdictional Officer's Comments:
The jurisdictional officer raised concerns about the bifurcation of services into two contracts, suggesting it might be an attempt to avoid GST liability by keeping maintenance charges below Rs. 7500 per month per member or avoiding the GST registration threshold of Rs. 20 lakhs.

(d) Analysis of Contracts:
The authority observed that the supply of water under Contract II is not practically feasible as a separate transaction. Water is typically stored in common tanks for multiple uses, making it impossible to supply water separately to individual apartments. The charges for water are based on the size of the flat, similar to maintenance charges, indicating that the two contracts are interlinked.

(e) Conclusion:
The authority concluded that Contract I and Contract II are directly linked, with no case of direct supply of water to individual residents. Therefore, the applicant is required to pay GST on the entire supply under Contract I.

Ruling:
Contract I and Contract II are directly linked, and there is no direct supply of water to individual residents. The applicant is required to pay GST as applicable on Contract I.

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