2021 (7) TMI 652 - AAR - GST

Levy of GST - maintenance charges collected by Emerald Court Co-op Housing Society Ltd (CHS) from members of its society - no sale by the Co-operative Housing Societies to their own permanent members - doctrine of mutuality - Serial No. 77 of N/N. 12/2017 C.T.-(Rate) dated 28.06.2017 - HELD THAT - GST is not liable to be paid on the amounts received by the society them from its members because of the principle of mutuality due to which, the society cannot be considered as an entity, separate from the individual members of the society - there were a lot of litigations and disputes by clubs/associations/ societies on this issue, earlier. However the said issue, with respect to Goods and Services Tax has been sought to be addressed by way of the proposed amendment made to Section 7 of the GST Act in the finance Budget, 2021. The amendment in section 7 has received the assent of the President of India on the 28th March, 2021 and in view of the same the issue of principles of mutuality in the case of cooperative societies like the applicant has been settled. In view of the amended Section 7 of the CGST Act, 2017, it is found that the applicant society and its members are distinct persons and the amounts received by the applicant, against maintenance charges, from its members are nothing but consideration received for supply of goods/services as a separate entity - The principles of mutuality, which has been cited by the applicant to support its contention that GST is not leviable on the maintenance charges collected by them from its members, is not applicable in view of the amended Section 7 of the CGST Act, 2017 and therefore, the applicant has to pay GST on the said amounts received against maintenance charges, from its members. The applicant is liable to pay GST on maintenance charges (by whatever name called) collected from its members, if the monthly subscription or contribution charged from the members is more then ₹ 7,500/- per month.

Summary

Issues Involved:
1. Liability to pay GST on maintenance charges collected by a Co-operative Housing Society (CHS) from its members.
2. Applicability of the doctrine of mutuality in the context of GST.
3. Interpretation of Section 7 of the CGST Act, 2017, and related provisions.
4. Impact of the retrospective amendment to Section 7 of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Liability to Pay GST on Maintenance Charges:
The applicant, a Co-operative Housing Society (CHS), sought an advance ruling on whether GST is applicable on maintenance charges collected from its members. The CHS provides various services such as security, cleaning, repairs, water, and common electricity, and raises monthly bills comprising property tax (GST not charged) and maintenance charges (GST charged).

2. Applicability of the Doctrine of Mutuality:
The applicant argued that the doctrine of mutuality applies, meaning there is no sale between the CHS and its members because the society acts as an agent for its members. Consequently, there is no consideration for the services rendered, only reimbursement, and therefore, GST should not be levied. The applicant cited various judicial precedents, including the Supreme Court's decision in the Calcutta Club Limited case, which held that clubs are not liable to charge GST on services provided to their members based on the principle of mutuality.

3. Interpretation of Section 7 of the CGST Act, 2017, and Related Provisions:
The jurisdictional officer contended that cooperative housing societies fall under the definition of "business" as per the GST Act. The officer emphasized that transactions between related persons, as defined under Section 15 of the GST Act, are considered "supply" even without consideration. The officer argued that the CHS and its members are distinct entities under the GST Act, and thus, the maintenance charges collected are subject to GST.

4. Impact of the Retrospective Amendment to Section 7 of the CGST Act, 2017:
The amendment to Section 7 of the CGST Act, introduced in the Finance Budget 2021, clarified that transactions between a person (other than an individual) and its members are deemed to be between two separate persons, thus subject to GST. This amendment, effective from July 1, 2017, settled the issue of mutuality in the context of GST for cooperative societies.

Conclusion:
The Authority for Advance Ruling (AAR) concluded that, in light of the amended Section 7 of the CGST Act, 2017, the CHS and its members are distinct entities. Therefore, the maintenance charges collected by the CHS from its members are considered consideration for the supply of goods/services. The doctrine of mutuality does not apply, and the applicant is liable to pay GST on maintenance charges if the monthly subscription or contribution exceeds ?7,500 per member.

Order:
The applicant is liable to pay GST on maintenance charges collected from its members if the monthly subscription or contribution exceeds ?7,500 per member.