9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (2) TMI 435 - AAAR - GSTSupply or not - Levy of CGST and SGST - amount of contribution received from its members - association of apartment owners - exemption upto Rs. 7500 from each member / flat - benefit of N/N. 12/2017 CT(R) dt 28.06.2017 (SI.No. 77) read with N/N. 02/2018 dt 25.01.2018 - Input tax credit - levy of CGST/SGST on amounts which it collects from its members for setting up a corpus fund - challenge to AAR decision. Whether the activities of the association of apartment owners are liable to tax under GST as a supply? - HELD THAT - In the instant case the monthly contribution made by the members to the association is in return for receiving the services of the Association in ensuring the maintenance and upkeep of the residential complex. The money collected by the Appellant from its members is used to procure services and goods from a third party and provide the benefits of such procured goods and services to the members of the association. In terms of Section 2(d) of the Indian Contract Act 1872 consideration needs to necessarily flow from one person to another. In the Finance Act 1994 the taxable event in terms of Section 66B was on services provided or agreed to be provided by one person to another . Under GST the taxable event is the supply of goods or services or both. As already mentioned supply though not defined has been explained in Section 7 of the CGST Act 2017 to cover the activities stated therein made in the course or furtherance of business. Under GST law the term business has been specifically defined in Section 2(17) of the CGST Act to include provision by a club association society or any such body (for a subscription or any other consideration) of facilities or benefits to its members. Thus there is a marked difference in the concept of the levy between the Finance Act and the CGST Act. Thus there is a supply of service by the Appellant to its members and the same is taxable under GST. Whether in terms of entry No.77 of the N/N. 12/2017- Central Tax (Rate) Dated 28-06-2017 as amended by the N/N. 02/2018-CentraI Tax (Rate) dated 25-01-2018 the contribution received by the association from its members are liable to tax only in excess of the amount of Rs. 7500 per month per member? - HELD THAT - Exemption notifications are subject to strict interpretation. The Advance Ruling Authority had correctly interpreted this exemption Notification. The Circular No.109/28/2019-GST dated 22.07.2019 issued by the CBIC only clarifies this position. The Appellant has argued that this Circular will apply only prospectively since it is oppressive in nature. This argument does not hold water since the said Circular does not introduce any new levy by its clarifications. The position regarding the exemption from GST was always applicable only when the individual member s contribution per month was within Rs. 7500/-. The Circular dated 22.07.2019 only clarified this position and did not bring in any new levy. Hence the question of applying the Circular prospectively does not arise. Maintainability of Advance Ruling pronounced - time limitation - Appellant has also contended that the ruling pronounced by the Authority after the mandated period of 90 days is unsustainable in law - HELD THAT - In this case the Authority was well within its jurisdiction to pass a ruling on the subject matter. Not adhering to the time limit in passing an order can be termed as an irregularity in procedure which can be set right in appeal proceedings - the ruling given by the Authority is correct in law and we do not find reason to interfere with the same. Decision of AAR upheld.
Issues Involved:
1. Taxability of contributions received from members by the appellant under GST. 2. Applicability of exemption under Notification No. 12/2017 CT(R) for contributions up to Rs. 7500 per month per member. 3. Requirement to restrict input tax credit. 4. Taxability of amounts collected for setting up a corpus fund. Issue-wise Detailed Analysis: 1. Taxability of Contributions under GST: The appellant, an association of apartment owners, argued that their transactions with members are governed by the principle of mutuality, meaning supplies made to members cannot be taxed. They cited the Supreme Court's decision in the Calcutta Club case, asserting that there is no privity of contract between the association and its members, thus no GST should be levied. The appellate authority examined the definition of "supply" under Section 7 of the CGST Act, which includes all forms of supply of goods or services for a consideration in the course or furtherance of business. The term "business" under Section 2(17) includes the provision of facilities or benefits by an association to its members for a subscription. The authority concluded that the activities performed by the association for maintenance and upkeep of the residential complex constitute a "supply" of services to its members, and the contributions made by members are considered "consideration" for these services. The authority distinguished the GST regime from the Finance Act, 1994, under which the Supreme Court's decision in the Calcutta Club case was made. The GST law's definition of "business" explicitly includes associations providing facilities to members, thus making the contributions taxable under GST. 2. Applicability of Exemption under Notification No. 12/2017 CT(R): The appellant contended that only contributions exceeding Rs. 7500 per month per member should be taxable, with the first Rs. 7500 being exempt. The appellate authority clarified that the exemption under entry No. 77 of the Notification No. 12/2017 CT(R) is applicable only if the entire contribution per member per month does not exceed Rs. 7500. If the contribution exceeds Rs. 7500, the entire amount is taxable. This interpretation aligns with the Supreme Court's ruling in the Dilip Kumar case, which mandates strict interpretation of exemption notifications in favor of the revenue. 3. Requirement to Restrict Input Tax Credit: The appellant did not challenge the advance ruling authority's decision that input tax credit can be claimed subject to restrictions under Section 17(2) of the CGST Act and Rule 42 of the CGST Rules. Therefore, this part of the ruling was upheld without further discussion. 4. Taxability of Amounts Collected for Setting Up a Corpus Fund: The advance ruling authority had determined that amounts collected for setting up a corpus fund are not liable to CGST/SGST. This part of the ruling was not contested by the appellant and was thus upheld. Additional Arguments and Findings: The appellant argued that the ruling by the advance ruling authority was influenced by a CBIC circular and should not be binding. The appellate authority dismissed this argument, stating that the circular merely clarified the existing legal position and did not introduce any new levy. The appellant also contended that the ruling was issued after the mandated period of 90 days, making it unsustainable. The appellate authority held that procedural irregularities do not render an order null and void, and the ruling remains valid unless set aside by a superior court. Conclusion: The appellate authority upheld the advance ruling authority's decision that: - Contributions received from members are taxable under GST. - The exemption under Notification No. 12/2017 CT(R) applies only if the contribution per member per month does not exceed Rs. 7500. - Input tax credit can be claimed subject to statutory restrictions. - Amounts collected for setting up a corpus fund are not taxable. The appeal filed by the appellant was dismissed on all accounts.
|
