Author’s Message
In this advance ruling, the applicant is supplying composite supply of Taxable as well as exempt
supplies, however, he tries to separate two contracts to escape from the Liability of GST but advance Authority of Advance Ruling contended against it.
Facts of the case
M/S Latest Developers Advisory Ltd (applicant) is going to enter into a contract with Residential Welfare Association (RWA) to provide maintenance of the Common Area of the society for which it enters into a contract with the society i.e Contract 1.However, the area lacks water supply and the applicant enters into another contract i.e Contract 2 with the individual flat owners to provide the supply of water to the common water tank of the society. However, it is the discretion of the flat owner to enter into such a contract.
Since, the supply of water (other than aerated, mineral, purified, distilled, medicinal, ionic, battery, demineralized, and water sold in sealed containers) is exempt under GST, the applicant contends that supply made under contract 2 is exempt from GST.
Questions Involved
Whether the applicant is required to pay GST on water charges collected from the customers for supply of water under contract 2?
Findings and Rulings
The Authority contends that the applicant has entered into the contract of maintenance of Residential welfare society which shall be taxable only if the aggregate turnover exceeds 20 lakh and the charges paid by members of the society exceeds 7500 per month.
In general practice, the supply of water is inclusive of maintenance services and hence supply of water with the separate agreement raises a suspicion in its activity.
Further, the water is going to be stored in the common underground water tank of the society.
Therefore the authority contended that the applicant is trying to split the contract into contract 1 and 2 to avoid the GST liability by keeping the maintenance charges below 7500 per month and also the applicant is not supplying water separately to individual Flat owner, the applicant is required to pay GST as per contract 1.
Click here to download the original advance ruling
https://drive.google.com/open?id=1lC8KXs03X_OxkWlQsUDlzJxTnx-6z_UK
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