Homeowners' association water charges form part of composite service and count toward GST exemption threshold.

Unprocessed water recovered by a homeowners' association from members is not treated as an exempt supply of goods under Entry 99 of Notification No. 2/2017-Central Tax (Rate) because it is recovered as part of the association's service package rather than as a separate sale. Water charges are intrinsically linked to maintenance and upkeep, so they form part of the Home Owners' Association service and must be aggregated with maintenance charges for the exemption threshold under Notification No. 12/2017-Central Tax (Rate). Once the threshold is crossed, the composite service is taxable under SAC 999598 at 18%, and separate invoicing or recovery at actuals does not exclude the charges from the taxable value absent valid pure agent treatment.

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Issues: (i) Whether the supply of unprocessed water by the applicant to its members is exempt under Entry 99 of Notification No. 2/2017-Central Tax (Rate); (ii) Whether water charges collected from members form part of the Home Owners' Association service and must be aggregated with maintenance charges for the Rs. 7,500 per member per month exemption threshold under Notification No. 12/2017-Central Tax (Rate); (iii) Whether the service provided by the applicant is taxable and, if so, at what rate.

Issue (i): Whether the supply of unprocessed water by the applicant to its members is exempt under Entry 99 of Notification No. 2/2017-Central Tax (Rate)

Analysis: The exemption for water in Entry 99 applies to goods. The applicant is not engaged in a separate sale of water as goods, but is recovering the cost of water as part of the facilities and services provided by a homeowners' association. The water supplied is therefore not an independent supply eligible for exemption under that entry.

Conclusion: The supply of water is not exempt under Entry 99 of Notification No. 2/2017-Central Tax (Rate).

Issue (ii): Whether water charges collected from members form part of the Home Owners' Association service and must be aggregated with maintenance charges for the Rs. 7,500 per member per month exemption threshold under Notification No. 12/2017-Central Tax (Rate)

Analysis: A residents' association and its members are treated as distinct persons for GST purposes, and the association's activities amount to a supply of services under Section 7(1)(a) and Section 7(1)(aa) of the CGST Act, 2017. The association's services are classifiable as Home Owners' Association services under SAC 999598. Water provided to members is intrinsically linked with the maintenance and upkeep of the residential complex, and separate invoicing or recovery at actuals does not make it an independent supply or exclude it from the taxable value. The applicant also did not satisfy the conditions for exclusion as a pure agent.

Conclusion: Water charges form part of the Home Owners' Association service and must be aggregated with maintenance charges for the exemption threshold.

Issue (iii): Whether the service provided by the applicant is taxable and, if so, at what rate

Analysis: Since the association's supply is a service and the water charges are part of the composite service supplied to members, the entire supply becomes taxable once the prescribed threshold is crossed. The applicable classification is under SAC 999598, and the notified rate for the service applies.

Conclusion: The service is taxable at 18% under Serial No. 33 of Notification No. 11/2017-Central Tax (Rate).

Final Conclusion: The applicant's water recoveries are part of the taxable association service rather than a separate exempt supply, and the aggregate member-wise contribution including water determines the threshold for GST liability.

Ratio Decidendi: Where a homeowners' association supplies amenities to its members as part of its composite service, separately recovered water charges that are integrally connected to maintenance do not constitute an independent exempt supply and must be included in the taxable value unless validly excluded under the pure agent rules.

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