GST on Water Charges for Housing Society Maintenance Services
The Rajasthan Authority for Advance Ruling decided that water charges collected by maintenance providers are part of a taxable composite supply.
- Ruling
- ADVANCE RULING NO. RAJ/AAR/2019-20/32 dated 07.02.2020
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if water supply could be treated as an exempt good.
- The Authority ruled the water supply is linked to maintenance services.
- GST applies to the total amount collected for maintenance and water.
In short
The company asked the Rajasthan Authority for Advance Ruling (AAR) if they could separate water supply from maintenance services to avoid Goods and Services Tax (GST). They argued that water supply should be exempt under government notifications. The Authority found that because the water is delivered through common infrastructure and billed by area rather than usage, it is not a separate supply. Instead, it is part of the overall maintenance service provided to the housing society.
What has changed
How it worked before
Businesses often assumed that splitting a single service into two separate contracts—one for maintenance and one for utilities—would allow them to treat parts of the transaction as tax-exempt.
What has changed
The Authority decided that artificial contract splitting does not change the tax status of a service. If services are naturally bundled together, they are treated as a single 'composite supply' and taxed at the rate of the main service.
Who this affects
Maintenance agencies, facility management companies, and Resident Welfare Associations (RWAs) providing bundled services to housing societies.
An example
Imagine a facility management firm that signs a maintenance contract with a society and a separate 'water supply' contract with each resident. The firm charges residents based on their apartment size rather than water meters. Under this ruling, the tax officer would likely ignore the separate water contract and demand GST on the entire amount collected from residents.
What you should do
Review your service contracts to ensure they reflect the actual nature of your work. Remember that an Advance Ruling only binds the specific company that asked and their local tax office; it is not a universal law for all businesses.
If you do nothing
If you assume this ruling does not apply to you and continue to split contracts to avoid tax, you risk a tax audit. If an officer decides your contracts are artificially split, you may be liable for unpaid GST, interest, and significant penalties.
The terms explained
- Composite supply
- A set of two or more goods or services that are naturally bundled together and provided as a single package in the ordinary course of business.
- Advance ruling
- A formal decision from tax authorities on how GST laws apply to a specific business transaction.
- Artificial bifurcation
- The practice of splitting a single business deal into multiple contracts just to lower tax bills or avoid registration.
The ruling in detail
Authority for Advance Ruling
M/s Latest Developers Advisory Ltd.
ADVANCE RULING NO. RAJ/AAR/2019-20/32 dated 07.02.2020 · Rajasthan
Questions before the authority
- Whether the applicant is required to pay GST on water charges collected from the customers for supply of water under Contract II?
Facts
The applicant provides maintenance services to housing societies under a contract (Contract I). They proposed a separate contract (Contract II) with individual residents to supply water, which they claimed was a separate supply of goods. The applicant argued that this water supply should be exempt from GST under Notification No. 2/2017.
Ruling
| Question | What the authority ruled |
|---|---|
| GST liability on water charges under Contract II | The applicant is required to pay GST as applicable on Contract I The authority found the contracts to be linked and rejected the claim of a separate supply of water |
The Authority ruled that the two contracts are directly linked and that there is no case of direct supply of water to individual residents. Consequently, the applicant is required to pay GST as applicable on the maintenance services provided under Contract I.
Reasoning
The Authority observed that the applicant is attempting to split a single service into two contracts to avoid GST thresholds or registration requirements. They noted that the water is stored in common tanks maintained by the society and that charges are collected based on square footage rather than actual water consumption. Therefore, the supply of water is considered part of the overall maintenance services provided to the society. The ruling relies on the interpretation of composite supply and the nature of services provided to Resident Welfare Associations.
Provisions relied on
- Section 97(2) of the CGST/SGST Act, 2017
- Section 2(52) of the CGST Act, 2017
- Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017
- Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017
- Circular No. 109/28/2019-GST dated 22.07.2019
For the practitioner
This ruling serves as a warning against **artificial bifurcation of contracts** to circumvent GST liability or registration thresholds. It clarifies that when services are intrinsically linked to maintenance provided to a society, they will be treated as a single composite supply. Practitioners should note that the Authority will look past the form of separate agreements to the **substance of the transaction**.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/raj_aar_32_2019-20_07.02.2020_ldal.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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