Industrial park operator's water supply exempt, maintenance and infrastructure charges taxable at 18% GST

AAR Tamil Nadu ruled on GST taxability of various charges by an industrial park operator. Raw water supply and related penalties/interest were exempted under notification 02/2017-CT(Rate). Maintenance charges for common facilities attracted 18% GST under SAC 995429 as they constituted taxable supply. PIDP charges were taxable at 18% under Group 99859 as infrastructure services. Interest on delayed lease premium payments was exempt when principal supply was exempt. Interest/penalties on taxable services (maintenance, PIDP) formed part of taxable value. Penalties for project/lease deed delays were exempt as underlying lease fees were exempt under notification 12/2017-CT(Rate).

---

---

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.

---