In a recent ruling by the Authority for Advance Ruling (AAR) in Andhra Pradesh, it was determined that the maintenance of flow meters for recycled water does not constitute a composite supply with the water supply itself. The case involved M/s Greater Visakhapatnam Smart City Corporation Ltd. (GVSCCL), which under a tripartite agreement with GVMC and HPCL, supplies recycled water through a sewage treatment network. This recycled water is exempt from GST under a specific notification. However, a new agreement introduced a 0.75% charge on the water bill for the maintenance of meters and instrumentation.
The central issue was whether this maintenance charge should be considered part of a composite supply with the supply of recycled water, which would attract a nil rate of tax.
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The AAR concluded that the maintenance of flow meters is not naturally bundled with the water supply, as it can be independently provided by any third party. According to the CGST Act, a composite supply requires that the services be naturally bundled and supplied together. As a result, the maintenance activity was classified as an independent supply under Maintenance and Repair Services, taxable at 18% (9% CGST and 9% SGST).
The exemption on recycled water supply remains unaffected, but GVSCCL is required to pay GST on the meter maintenance charges. This decision clarifies the tax obligations for similar services, emphasizing the distinction between composite and independent supplies under GST regulations.
Order Date: 16 October 2025
Case Title: M/s Greater Visakhapatnam Smart City Corporation Ltd. (GVSCCL) v. Authority for Advance Ruling, Andhra Pradesh
Facts
- GVSCCL, a Special Purpose Vehicle under the Smart City Mission, entered a tripartite agreement with GVMC and HPCL for supply of recycled water through a sewage treatment network.
- The recycled water was exempt under Sl. No. 99 of Notification No. 02/2017–CT (Rate) dated 28.06.2017.
- In a renewed agreement dated 10.06.2025, a 0.75% monthly charge was introduced on the water bill for maintenance of meters and instrumentation.
- The applicant sought to determine whether this maintenance charge formed part of a composite supply with the supply of recycled water, thereby attracting the nil rate of tax.
Issue
- Whether maintenance of flow meters and instrumentation for recycled water constitutes a composite supply with water supply, or is a separate, taxable service under GST?
Order
- The Authority held that maintenance of flow meters is not naturally bundled with recycled water supply, as it can be independently provided by any third party.
- Under Section 2(30) of the CGST Act, a composite supply requires that the supplies be naturally bundled and supplied in conjunction.
- The maintenance activity is an independent supply, classifiable under SAC 9987 (Maintenance and Repair Services) and taxable at 18% (9% CGST + 9% SGST).
- The exemption under Notification No. 02/2017–CT (Rate) continues to apply only to the supply of recycled water.
- Hence, GVSCCL is liable to pay GST at 18% on meter maintenance charges.
