2026-VIL-85-AAR
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SGST Advance Ruling Authority

GST – Karnataka AAR - Taxability of water charges collected by Residents Welfare Association (RWA) from its members - Applicant, a Residents Welfare Association, supplies unprocessed water to its members sourced from its own borewells as well as from third-party vendors - The applicant collects the water charges separately from the maintenance charges levied on the members - Whether the supply of unprocessed, unbottled water by the RWA to its members is exempt from GST under Entry 99 of Notification No.2/2017-Central Tax (Rate) – HELD - The applicant is not selling water as goods to its members, it is merely recovering from members the actual cost of water procured from third parties - The supply of water constitutes an integral component of the Home Owners’ Association services provided by the applicant and cannot be regarded as an independent or distinct supply. The provision of water is intrinsically linked with the maintenance and upkeep of the residential complex, which is the principal supply rendered by the Association to its members. Therefore, the recovery of water charges from members, even if shown separately in the invoice and collected on actual consumption basis, would form part of the composite supply of services provided by the Association. Such recovery does not assume the character of an independent supply of water as goods, but remains part of the principal supply of maintenance and related services - The supply of water by the RWA is not exempt under Entry 99 of Notification No.2/2017-Central Tax (Rate), as the supply of water forms an integral part of the "Home Owners' Association" services provided by the RWA to its members and does not constitute an independent supply of goods eligible for exemption - The supply of water by the RWA to its members is not exempt from GST, and the water charges must be included in the aggregate turnover for determining the INR 7,500 per member per month exemption threshold for the RWA's services – Ordered accordingly - Whether the water charges collected by the RWA should be included in the aggregate turnover for determining the INR 7,500 per month per member threshold for GST applicability on the services provided by the RWA – HELD - The activity of supplying water constitutes as a supply under Section 7(1)(aa) of the CGST Act, 2017 and the recovery of water charges is includable in value of supply. Consequently, such recoveries form part of the taxable value and are liable to GST - Applicant’s contention that water charges are pure reimbursements of expenses and should be excluded from the taxable value under Section 15(3) of the CGST Act and Rule 33 of the CGST Rules, is rejected as the RWA does not satisfy the conditions prescribed for a "pure agent" under the said Rule - The water charges collected by the RWA must be aggregated with the maintenance charges for determining the INR 7,500 per member per month exemption threshold under Notification No. 12/2017-CT (Rate). The activities undertaken by the RWA for its members constitute a supply of services, which is classifiable under SAC 999598 (Membership organisation services, including services of RWAs/Home Owners' Associations) and is taxable at 18% GST.
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