Water Charges and GST in Bengaluru Communities: Added to Maintenance for the Rs 7,500 Test

Every month, an owners' association in Bengaluru pumps water from its own borewells, tops up the common sump with tanker water bought at 5 paise a litre, and passes the cost on to members. For some members, maintenance alone stayed under Rs 7,500 a month. Add the water charge, and the total crossed it. The association asked the Karnataka Authority for Advance Ruling a direct question: is that water exempt from GST, and does it count towards the Rs 7,500 limit? The answer, dated 16 March 2026, went against the association on both points.

The ruling is Order No. KAR.ADRG 15/2026 for the Prestige North West Country Owners Association, listed on the GST Council's advance ruling register. This guide reads it for Bengaluru buyers and owners in communities that run their own water supply. It is buyer guidance, not tax advice, and an advance ruling answers one applicant's questions on its own facts.

The short answer. The Karnataka authority ruled that the association's supply of water to members is not exempt under entry 99 of Notification No. 2/2017-Central Tax (Rate), because it forms part of the services the association provides and is not an independent supply of goods. It ruled that water charges must be aggregated with maintenance charges when testing the Rs 7,500 per member per month exemption, and that the association's service is taxable at 18 per cent, 9 per cent CGST plus 9 per cent SGST. The trade-off: a community that manages its own water can control supply and cost, but on this ruling the water line adds to the monthly total that decides whether GST applies at all.

What did the association ask?

Three questions. The association described itself as administering maintenance of common area property, upkeep and repairs through suppliers, and said it revised maintenance charges for 2024 to 2025, taking some members above Rs 7,500 a month when water charges were included. Its water came from its own on-site borewells and from external vendors at INR 0.05 per litre, discharged into a common sump, and it said the water was not processed, filtered, disinfected or softened at any point.

It then asked whether supply of this unprocessed, unbottled water to members is exempt under entry 99 of Notification No. 2/2017-Central Tax (Rate) read with Section 11(1) of the CGST Act; whether water charges should be included when determining the Rs 7,500 per member per month threshold for RWA services; and, if GST applies, at what rate.

Is water supplied by an association exempt from GST?

Not on this ruling. The authority ruled that the supply of water by the applicant is not exempt under entry 99 of Notification No. 2/2017-Central Tax (Rate), as it forms part of the home owners' association services provided to members and does not constitute an independent supply of goods eligible for exemption under that entry.

A separate Karnataka ruling from the same year reached a similar view on tanker and BWSSB water. In the Godrej United Owners Association order, discussed in our guide to GST on corpus and sinking funds, the authority held that contributions for water through tankers or from BWSSB are incidental to the association's maintenance services and part of a composite supply, so entry 99 does not apply.

Why is an association's supply to its own members taxable at all?

Because GST law treats them as separate persons. The ruling quotes Section 7(1)(aa) of the CGST Act, which includes in supply the activities or transactions by a person, other than an individual, to its members or constituents for cash, deferred payment or other valuable consideration. Its explanation says that, notwithstanding anything in any other law or judgment, the person and its members are deemed to be two separate persons. The ruling also notes that the definition of person in Section 2(84) includes an association of persons or a body of individuals, whether incorporated or not. From these, it concluded that an association and its members are distinct persons for GST, and the association's activities for members are a supply of services.

On the water itself, the authority said the association is not selling water as goods to members; it is recovering from members the actual cost of water bought from third parties such as tanker suppliers, and that recovery is integrally linked to the overall service of maintaining the residential complex and its common facilities. It said the water is an integral component of the home owners' association service and cannot be regarded as an independent supply, even if shown separately in the invoice and collected on actual consumption.

Do water charges count towards the Rs 7,500 limit?

Yes, on this ruling. The authority ruled that water charges form part of the home owners' association service and must be aggregated with maintenance charges for determining the Rs 7,500 per member per month exemption threshold under Notification No. 12/2017-Central Tax (Rate). It also said the service shall be liable to tax only where the aggregate monthly contribution per member, inclusive of water charges, exceeds the exemption threshold prescribed under entry 77.

Here is what that means in numbers. Suppose a member's monthly maintenance is Rs 6,800 and the water charge is Rs 1,200. On this ruling, the two are added, giving Rs 8,000, which is above Rs 7,500. Without the water line, the same member would have been under the limit.

Could the association treat water as a pass-through cost?

The association argued that, and lost. It relied on Section 15(3) of the CGST Act and Rule 33 of the CGST Rules on pure agents. The authority said recovering water charges at actuals and issuing separate invoices does not qualify the association to exclude the amount from taxable value, because it did not satisfy the mandatory conditions for a pure agent under Rule 33.

The ruling quotes those conditions. The supplier must act as a pure agent of the recipient when it pays a third party on the recipient's authorisation; the payment must be separately indicated in the invoice; and the supplies procured as pure agent must be in addition to the services the supplier provides on its own account. The explanation adds that a pure agent enters into a contractual agreement to act as the recipient's agent, does not intend to hold title to the goods or services, does not use them for its own interest, and receives only the actual amount incurred. The authority concluded that recovery of water charges is included in the value of supply and is a supply under Section 7(1)(aa) of the CGST Act.

What rate applies, and what about the full amount question?

The ruling says the service is classifiable under SAC 999598, membership organisation services, including services of RWAs and home owners' associations, and is taxable at 18 per cent, 9 per cent CGST plus 9 per cent SGST, under serial number 33 of Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017.

The association also relied on the Madras High Court's Greenwood Owners Association judgment, which held that only contributions in excess of Rs 7,500 would be taxable. The Karnataka authority noted that the department's appeal led a Division Bench of the Madras High Court to stay the order passed in the writ petitions, and said the issue remains sub judice and the legal position is not yet final. Our guide to the Rs 7,500 rule for housing societies sets out the CBIC flyer's full-amount example.

What should a Bengaluru buyer take from this?

Ask about water before you buy into a community that runs its own supply. Find out whether water is billed separately or inside maintenance, how much it usually adds per month, and whether the association is registered for GST. If the combined monthly figure is close to Rs 7,500, the water line can decide whether GST appears on the bill. When reviewing a resale flat or villa, ask the seller for a year of bills so you see any variation in water costs through the year, not just a single month.

A seven-point checklist on water charges and GST

1. Ask whether the community's water comes from borewells, tankers, BWSSB or a mix.
2. Ask whether water is billed with maintenance or as a separate line.
3. Add the typical monthly water charge to maintenance and compare with Rs 7,500.
4. Ask whether the association is registered for GST and charges it on bills.
5. Check bills across a full year, not just one month.
6. Ask whether the association treats water as part of its services for GST.
7. Budget for GST at the rate the association applies if the combined total crosses the limit.

Frequently asked questions

Is water supplied by an apartment association exempt from GST in Karnataka?

Not according to KAR.ADRG 15/2026 dated 16 March 2026. The Karnataka authority ruled that an owners' association's supply of water to members is not exempt under entry 99 of Notification No. 2/2017, because it forms part of the association's services and is not an independent supply of goods.

Are water charges included in the Rs 7,500 maintenance limit?

Yes, on this ruling. The Karnataka authority held that water charges form part of the home owners' association service and must be aggregated with maintenance charges when determining the Rs 7,500 per member per month exemption threshold under Notification No. 12/2017-Central Tax (Rate).

What GST rate applies to apartment association services?

The Karnataka ruling classified the association's service under SAC 999598, membership organisation services including RWA and home owners' association services, taxable at 18 per cent, made up of 9 per cent CGST and 9 per cent SGST, under serial number 33 of Notification No. 11/2017.

Can an association pass on water costs without GST as a pure agent?

Not in this case. The authority held that recovering water charges at actuals with separate invoices did not meet the Rule 33 pure agent conditions, so the charges could not be excluded from taxable value under Section 15(3) of the CGST Act and remained part of the supply.

Last updated 2026-11-05. PropNewz Team.