2019 (11) TMI 224 - AAR - GST

Levy of GST - maintenance charges collected by the applicant from its members - Residential Welfare Association (RWA) - activity of procuring Goods and Services from third parties for upkeep and maintenance of Apartments and collecting the monies from its members to pay third party vendors - HELD THAT - The applicant association is supplying the services of maintenance of the common areas including repairs and upkeep and since the common areas belongs all apartment owners, the maintenance charges are charged on the basis of the ratio of area of each apartment to the total area of all apartments and hence the applicant is providing a service of maintenance of apartments, buildings and property to all members and this is in the course of business. Hence this would amount to a taxable supply of services. Applicability of exemption entry no 77 of notification 12/2017 Central Tax (Rate) dated 28.06.2017 - maintenance charges collected from members - HELD THAT - The exemption under entry number 77 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 2/2018 - Central Tax (Rate) dated 25.01.2018 is available for an amount, up to ₹ 7,500/- per month per member, collected for sourcing of goods or services from a third person for common use of the members. If exemption is available, whether it is available on per member basis or per flat basis, as some members could have more than one flat? - Circular No. 109/28/2019-GST dated 22.07.2019 - HELD THAT - The Circular clarifies that As per general business sense, a person who owns two or more residential apartments in a housing society or a residential complex shall normally be a member of the Residential Welfare Association (RWA) for each residential apartment owned by him separately. The ceiling of ₹ 7,500/- per month per member shall be applied separately for each residential apartment owned by him - in the applicant's terms, the exemption is applicable to eligible members on per flat basis. Whether the exemption as per entry no 77 of Notification 12/2017 Central Tax (Rate) is a standard exemption that can be claimed irrespective of amount collected towards maintenance? - Circular No. 109/28/2019-GST dated 22.07.2019 - HELD THAT - The Circular clarifies that The exemption from GST on maintenance charges charged by a Resident Welfare Association (RWA) from resident is available only if such charges do not exceed ₹ 7,500/- per month per member. In case the charges exceed ₹ 7,500/- per month per member, the entire amount is taxable - thus, the exemption of ₹ 7,500/- is not available when the maintenance charges exceed ₹ 7,500/- per month per member. Therefore the members are required to discharge GST on the entire maintenance charges and not on just the amount in excess of ₹ 7500/-. The same ratio applies to the earlier period when the exemption was available on maintenance charges upto ₹ 5000/-. Whether the electricity charges paid to BESCOM (Electricity supply authority) for the power consumed towards common facilities and separately recovered from members, liable to GST? - HELD THAT - The electricity bill received in relation to the consumption of electricity for the common utilities is in the name of the applicant. The applicant is not involved in the supply of electrical energy to the members but is involved in providing the service of upkeep and maintenance of the common utilities of the apartments and for this the electricity consumed by them becomes an input. Though the electricity bill is distributed to all its members, it is not the consideration for the supply of electrical energy to the members but the value is a part of the consideration for the supply of services to its members and hence is liable to tax at appropriate rates - this value of electricity charges separately shown in the invoices is to be added to the considerations shown towards the same service of upkeep and maintenance charged to individual members and then the consideration for the supply of such service is to be arrived and the taxable value shall be determined. Levy of GST - Corpus/Sinking Fund collected from members - HELD THAT - The applicant collecting the amounts towards corpus / sinking fund for future supply of services meant for its members. It is a fact that the corpus fund or sinking fund is mandatory under the Bye-laws of the Co-operative Societies/ Resident Welfare Associations and is in the nature of a deposit towards unforeseen events or planned events - In the instant case the corpus / sinking fund so collected is the amount collected towards the future supply of service and accordingly gets applied as consideration towards supply of services only at the time of actual supply of services. Therefore the amounts collected towards corpus/ Sinking fund do not form part of consideration towards supply of services at the time of collection and hence is are not liable to GST, at the time of collection. However the amounts so utilized for provision of service are liable to tax at the time of actual supply of service.

Summary

Issues Involved:
1. Liability of GST on maintenance charges.
2. Applicability of exemption under entry no. 77 of Notification 12/2017 for maintenance charges.
3. Basis of exemption applicability (per member or per flat).
4. Applicability of exemption when maintenance charges exceed ?7,500/-.
5. GST liability on electricity charges paid to BESCOM and recovered from members.
6. GST liability on Corpus/Sinking Fund collected from members.

Detailed Analysis:

1. Liability of GST on Maintenance Charges:
The Applicant, an Apartment Owners Association, is engaged in providing maintenance services for common areas. As per Section 2(17) of the CGST Act 2017, the term "business" includes the provision of facilities or benefits to members by an association for a subscription or other consideration. Section 7(1) of the CGST Act 2017 defines "supply" to include all forms of supply of goods or services for a consideration by a person in the course or furtherance of business. Therefore, the activity of procuring goods and services for maintenance and collecting monies from members is considered a taxable supply of services under GST.

2. Applicability of Exemption under Entry No. 77 of Notification 12/2017:
The exemption under entry no. 77 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 2/2018 - Central Tax (Rate) dated 25.01.2018, applies to services provided by a non-profit entity to its members up to an amount of ?7,500/- per month per member for sourcing goods or services from a third person for common use. The Applicant, being a non-profit organization registered under the Karnataka Apartment Owners Association Act 1972, qualifies for this exemption.

3. Basis of Exemption Applicability (Per Member or Per Flat):
As clarified in Circular No. 109/28/2019-GST dated 22.07.2019, the exemption of ?7,500/- per month per member is applied separately for each residential apartment owned by a member. Therefore, if a member owns multiple flats, the exemption is applicable on a per flat basis.

4. Applicability of Exemption When Maintenance Charges Exceed ?7,500/-:
The exemption of ?7,500/- is available only if the maintenance charges do not exceed ?7,500/- per month per member. If the charges exceed ?7,500/-, the entire amount becomes taxable. For example, if the maintenance charges are ?9,000/- per month per member, GST is payable on the entire ?9,000/- and not just on the amount exceeding ?7,500/-.

5. GST Liability on Electricity Charges Paid to BESCOM and Recovered from Members:
The electricity charges paid to BESCOM for power consumed towards common facilities and separately recovered from members are liable to GST. The Applicant recovers the actual charges paid for common area power consumption from members. These charges form part of the consideration for the supply of maintenance services and are thus taxable.

6. GST Liability on Corpus/Sinking Fund Collected from Members:
Corpus/Sinking Fund collected from members is not liable to GST at the time of collection, as it is considered a deposit for future supply of services. As per Section 2(31) of the CGST Act 2017, deposits given for future supply are not considered payment until applied as consideration. Therefore, the amounts collected towards the Corpus/Sinking Fund do not form part of the consideration for the supply of services at the time of collection but are taxable when utilized for the provision of services.

Ruling:
1. The activity of procuring goods and services for maintenance and collecting monies from members is liable to GST.
2. The exemption of ?7,500/- in terms of entry no. 77 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017, as amended, applies to maintenance charges collected from members.
3. The exemption up to ?7,500/- is applicable on a per flat basis when members own more than one flat.
4. The exemption of ?7,500/- is available only if the maintenance charges do not exceed ?7,500/- per month per member. If the charges exceed ?7,500/-, the entire amount is taxable.
5. Electricity charges paid to BESCOM for common facilities and recovered from members are liable to GST as part of the consideration for maintenance services.
6. The Corpus/Sinking Fund collected from members is not liable to GST at the time of collection but is taxable when utilized for the provision of services.