The Andhra Pradesh Authority for Advance Ruling (AAR) has held that the maintenance charges collected by Greater Visakhapatnam Smart City Corporation Limited (GVSCCL) from Hindustan Petroleum Corporation Limited (HPCL) for upkeep of flow meters used to measure recycled water are not part of a composite supply and will therefore be taxed separately at 18% GST.
The bench of K. Ravi Sankar and B. Lakshmi Narayana has observed that the maintenance of flow meters is to be treated as a standalone supply of service, falling under Heading 9987 – Maintenance, repair and installation (except construction) services, taxable at 18% (9% CGST + 9% SGST) under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended. The earlier ruling of the Authority confirming nil rate for recycled water under Sl. No. 99 of Notification No. 02/2017-CT(R) continues to hold good and is not disputed. However, the ancillary maintenance charges cannot take the character of the principal supply, as they are independent, contractual, and separately priced.
The Applicant, GVSCCL, a Special Purpose Vehicle under the Smart City Mission, had entered into a tripartite agreement with the Greater Visakhapatnam Municipal Corporation (GVMC) and HPCL for the development of a sewerage system and the supply of recycled wastewater to industries in Visakhapatnam.
The applicant sought the advance ruling on the issue whether the maintenance services should be treated as part of the principal supply of recycled water, which is exempt from GST.
To measure the exact supply of recycled water, flow meters were installed at HPCL’s premises, and the supply quantity recorded by these meters formed the basis of billing. An earlier advance ruling had already confirmed that supply of recycled water is exempt from GST under the relevant notification.
Under the renewed agreement dated 10 June 2025, HPCL is charged 0.75% of the monthly recycled water bill for maintenance of flow meters, instrumentation, and automation systems.
GVSCCL argued that this maintenance was ancillary to the principal supply of recycled water, and therefore, the entire transaction constituted a composite supply, making it eligible for Nil GST, similar to recycled water.
The Authority rejected this claim and observed that the maintenance charges are billed separately from the cost of water. The activity of maintaining flow meters is not naturally bundled with water supply. Such maintenance could be performed by any third-party service provider. The services are independent and not incidental to the water supply in the ordinary course of business.
Therefore, the conditions for composite supply under Section 2(30) of the CGST Act were not satisfied.
Ruling Details
Applicant’s Name: M/s Greater Visakhapatnam Smart City Corporation Limited
Ruling Date: 16.10.2025
