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2021 (1) TMI 375 - AAR - GSTLevy of GST - built -up area received from each member as Common Maintenance Fund / Deposit - time of supply for such transaction - HELD THAT - The taxable event in GST is supply of goods or services or both - the GST Laws have provided certain exceptions to the requirement of supply being made for consideration and in the course of furtherance of business. The definition of consideration is inclusive and consideration may be in cash or kind. The payment received will not be treated as consideration, if there is no direct link between the payment and supply. From the close scrutiny of above definition, it is clear that there should be a close nexus between the payment and supply and thus, any payment/exchange/barter etc. would be treated as consideration for supply and liable to GST. Prima facie a conclusion can be drawn without much difficulty that a deposit given in respect of the supply shall not be considered as payment made for such supply unless the supplier appropriates such deposit as consideration for the said supply. In the instant case, we find that the applicant is a registered entity as an Association of Persons and has a legal existence separate from its members. The applicant is collecting the amounts towards Common Maintenance Fund (Deposit) @ ₹ 250/- per square foot of built-up area for future supply of services viz. maintenance, repair etc. of the common amenities, facilities, services, conveniences, utilities and common infrastructure of the Scheme meant for its members. It is a fact that the Common Maintenance Fund (Deposit) is mandatory under the Bye-laws of the Co-operative Societies/Resident Welfare Associations and is in the nature of a non-returnable deposit towards unforeseen events or planned events. Such deposit is never to be returned to the members, but same along with its interest will be used as and when required in future for maintenance, repair etc. of the common amenities, facilities, services, conveniences, utilities and common infrastructure of the Scheme meant for its members. Thus, the applicant, in addition to maintenance charges, also collected amount as Common Maintenance Fund (Deposit) from their members which is non-returnable. Since, the said amount is collected as non-returnable common maintenance fund, such deposits can be considered for such supply of service as mentioned above and, hence, will be liable to tax. It is worthwhile to mention that the applicant themselves stated in the application that sometimes, maintenance deposit standing the name of the person who is leaving this society shall get transferred to new person who is coming in as new member of this society in his place. Thus, in this case, said deposit is also not refunded but transferred the same into account of new member by making accounting entry - the said deposit cannot be considered as non-refundable and, hence, will be taxable under GST. Time of supply for such transaction - HELD THAT - The proviso to the clause (31) of the Section 2 of the CGST Act, 2017, as discussed in foregoing paras, states that the deposit given in respect of a future supply shall not be considered as payment made for such supply until the supplier applies such deposit as consideration. In the instant case, the common maintenance fund/deposit so collected is the amount collected towards the future supply of service of maintenance, repair etc. and accordingly, gets applied as consideration towards supply of services only at the time of actual supply of services. Therefore, the amount collected towards the common maintenance fund/deposit do not form part of consideration towards supply of services at the time of collection, however, the amounts so utilized for provision of service are liable to GST at the time of actual supply of service.
Issues Involved:
1. Liability to pay GST on the common maintenance fund/deposit collected from members. 2. Time of supply for such transaction if GST is applicable. Issue-wise Detailed Analysis: 1. Liability to Pay GST on the Common Maintenance Fund/Deposit Collected from Members: The applicant, a registered Commercial Co-Operative Service Society, provides maintenance services for common facilities/amenities to its members. The society collects a monthly maintenance fee and a one-time common maintenance fund/deposit from its members. The applicant has sought clarification on whether GST is applicable to the common maintenance fund/deposit. The GST Act defines "supply" under Section 7(1) and includes all forms of supply of goods or services made for a consideration in the course or furtherance of business. The term "consideration" is defined under Section 2(31) of the CGST Act, which includes any payment made for the supply of goods or services but excludes deposits unless they are applied as consideration for the supply. The applicant argues that the common maintenance fund is a refundable deposit and not consideration for any specific supply of goods or services. The fund is intended to generate interest income used for common expenses, and it is refundable when a member ceases to be part of the society. Therefore, the applicant contends that this transaction does not qualify as a "supply" under GST law and should not be liable for GST. However, the ruling authority finds that the common maintenance fund collected is non-returnable and is used for future maintenance services. The fund is mandatory under the society's bylaws and is not refunded to members but transferred to new members when units are sold. Thus, the deposit is considered as consideration for the supply of future maintenance services and is liable to GST. 2. Time of Supply for Such Transaction if GST is Applicable: The applicant contends that if GST is payable, the time of supply should be when the deposit is adjusted against the supply of services. According to the proviso to Section 2(31) of the CGST Act, a deposit given for future supply is not considered payment until it is applied as consideration for the supply. The ruling authority agrees that the common maintenance fund collected is for future services. Therefore, the amount collected does not form part of the consideration at the time of collection. GST is payable at the time of actual supply of services when the deposit is utilized. Ruling: 1. The applicant is liable to pay GST on the common maintenance fund/deposit collected from their members. 2. The amounts utilized for the provision of services are liable to tax at the time of actual supply of service.
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