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2021 (12) TMI 134 - AAR - GSTLevy of GST - contribution received from members - benefit of exemption under entry no. 77 of Notification no.12/2017-CTR dated 28th June, 2017 for the value upto ₹ 7,500/- per month per member and in case the said monthly contribution exceeds ₹ 7,500/- per month - levy of GST on differential value - levy of GST on amount collected from its members towards Sinking Fund, Building Repair Fund and Election and Education Fund - supplies otherwise exempted from tax or charged at Nil rate shall be included in value in computing threshold amount of ₹ 7,500/- per month per member under entry no. 77 of Notification no.12/2017-CTR dated 28th June, 2017, for determining the tax liability or not - contribution collected to defray expenses for supply of water - Potable water received from MCGM u/s 169 of Mumbai Municipal Corporation Act, 1888 - Flush Water (Non Potable water) generated from Sewage treatment plant installed in the Society premises - Input tax credit on the expenses incurred for heavy repairs and maintenance of the society building premises and which are not capitalized in books of accounts - principles of mutuality. Whether the applicant is liable to pay GST on the contribution received from its members? - HELD THAT - The applicant society and its members are distinct persons and the various charges received by the applicant 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. There is a marked difference in the concept of the levy between the Finance Act and the CGST Act. In terms of the Finance Act, it was sufficient that a service was rendered by one person to another for a consideration in the taxable territory for the levy of service tax to be attracted. However, under GST, the supply of the service should necessarily be in the course of or furtherance of business and 'business' has been defined to include provision by a club, association, society or any such body which provides facilities or benefits to its members for a subscription. The doctrine of mutuality was examined by the Supreme Court in the context of the Sales Tax law. However, the amended definition of Section 7 has put an end to the issue of the doctrine of mutuality in the cases of registered societies like the applicant. According to the amended definition the applicant and its members are to be treated as distinct persons. Hence, it is held that there is a supply of service by Applicant to its members and the same is taxable under GST. Whether the applicant can avail the benefit of exemption under Entry No. 77 of Notification No, 12/2017-CTR dated 28.06.2017 for the value upto ₹ 7,500/- per month per member and in case the said monthly contribution exceeds ₹ 7,500/- per month, then GST is leviable only on differential value in excess of ₹ 7,500/-? - HELD THAT - The exemption as per the entry 77 of the Notification No 12/2017 CT (R) is available only when a member's contribution per month is upto an amount of ₹ 7,500/-. A member who contributes an amount which is more than ₹ 7,500/-, will not be eligible for the exemption under entry No 77 and the entire contribution amount will be liable to be taxed - a member who contributes an amount which is more than ₹ 7,500/-, will not be eligible for the exemption under entry No 77 and the entire contribution amount is liable to be taxed, contribution may be by whatever name called. Whether the applicant is liable to pay GST on amount collected from its members towards a) Sinking Fund, b) Building Repair Fund and c) Election Education Fund - HELD THAT - The applicant has not produced any evidence to show that there are instances when such collected amounts are returned back to members after its collection. In order to collect deposit by co-operative society, the society has to follow certain procedure of law. Anyone cannot simply collect amounts as deposit. The applicant has not produced any proof as to what procedure was followed while collecting such deposit, whether in balance sheet said amounts are shown as deposit collected individual name wise, what is the amount of interest paid towards the deposit etc. Hence, amount collected towards sinking/repair fund is nothing but collection of certain amount as maintenance advance for overall maintenance of society. Hence, the said amount is liable to tax. The fund once collected becomes the property of the society. The individual member does not have right over the said money. So to call it as a deposit will be misnomer. It is a charge by the society for specific purpose and said charge is authorized by the general body and is as per the other provisions of the co-operative law. Some-times it may be a percentage of maintenance amounts. Similarly with regard to question regarding election and education fund collected by the applicant, we find that the same are liable to tax. Whether the supplies otherwise exempted from tax or charged at Nil rate shall be included in value in computing threshold amount of ₹ 7, 500/- per month per member under entry no. 77 of Notification no.12/2017-CTR dated 28th June, 2017, for determining the tax liability? - HELD THAT - As per clause (b) in Sr No 77 of said Notification, exemption is available to housing societies for provisions of carrying out any activity which is exempt from the levy of Goods and service Tax assuming that a housing society is a non-profit registered entity; and property tax and electricity, etc. are exempt from the levy of GST. Thus, charges, collected by the society on account of property tax, electricity charges and other statutory levies would be excluded while calculating the limit of ₹ 7,500/-. Whether contribution collected to defray expenses for supply of following types of water are covered under entry 99 of Notification 2/2017-CTR dated 28th June, 2017 i.e. under HSN Code 2201 and attracts NIL rate of tax? - HELD THAT - Notification 2/2017-CTR dated 28th June, 2017 pertains to goods supplied and is not applicable to services supplied. The applicant in the subject case is not selling goods per se. Rather it is supplying potable water through storage and pumping system. Whereas the applicant is supplying Flush Water only after treatment carried out in its treatment plant. In both the cases water per se is not sold. The applicant is providing the services of supplying water to its members. The applicant would be charging the members not on the quantity of water supplied but on the process undertaken to supply the water which is nothing but rendering of services. Thus, the provisions of entry 99 of Notification 2/2017-CTR dated 28th June, 2017 is not applicable in the instant case. Whether input tax credit can be claimed on the expenses incurred for heavy repairs and maintenance of the society building premises and which are not capitalized in books of accounts? - HELD THAT - The applicant is engaged in club or association supply of service as a business and the construction service is used for furtherance of the said business. Thus the supply rendered by the applicant is also covered under Section 17 (5) (d) read with explanation mentioned therein. ITC on GST paid on such supply of service as mentioned above will not be available to the extent of capitalisation of the said service. Any expenditure benefit which is likely flow over a few years needs to be capitalized, so no ITC is available for such expenditure. Major repairs involve large expenditures that extend the useful life of an asset - ITC on the expenses incurred for heavy repairs and maintenance of the society building will not be available to the extent of capitalisation as mentioned in Explanation of Section 17(5) of the CGST Act, 2017.
Issues Involved:
1. Liability to pay GST on contributions received from members. 2. Exemption under entry no. 77 of Notification no. 12/2017-CTR. 3. GST applicability on amounts collected towards specific funds. 4. Inclusion of exempt supplies in computing the threshold amount. 5. Taxability of contributions for water supply under entry 99 of Notification 2/2017-CTR. 6. Eligibility for input tax credit on heavy repairs and maintenance expenses. Detailed Analysis: 1. Liability to Pay GST on Contributions Received from Members: The applicant argued that based on the principle of mutuality, the society and its members are not distinct persons, and thus transactions between them should not be taxable. However, the judgment clarified that under the GST regime, the taxable event is the 'supply' of goods or services. The amendment to Section 7 of the CGST Act, 2017, deems activities or transactions between a person and their members to be supplies, thus making them taxable. The judgment concluded that the society and its members are distinct persons, and contributions received are considered as consideration for services, making them liable to GST. 2. Exemption Under Entry No. 77 of Notification No. 12/2017-CTR: The applicant sought exemption for contributions up to ?7,500 per month per member and argued that GST should be levied only on the amount exceeding ?7,500. The judgment referred to the Circular No. 109/28/2019-GST, which clarified that if the contribution exceeds ?7,500, the entire amount is taxable. Despite the applicant citing a contrary Madras High Court ruling, the judgment noted that the decision has been stayed and thus held that contributions exceeding ?7,500 are fully taxable. 3. GST on Amounts Collected Towards Specific Funds: The applicant contended that amounts collected for the Sinking Fund, Building Repair Fund, and Election and Education Fund are deposits and not consideration for services. The judgment disagreed, stating these funds are collected as per the society's bye-laws and are not refundable, thus constituting consideration for services. Therefore, these amounts are liable to GST. 4. Inclusion of Exempt Supplies in Computing Threshold Amount: The applicant argued that supplies exempt from GST should not be included in computing the ?7,500 threshold. The judgment agreed, stating that charges collected for property tax, electricity, and other statutory levies, which are exempt from GST, should be excluded when calculating the threshold limit. 5. Taxability of Contributions for Water Supply Under Entry 99 of Notification 2/2017-CTR: The applicant claimed that contributions for potable and non-potable water supply should attract NIL GST under entry 99. The judgment clarified that the applicant is providing a service of water supply rather than selling goods per se. Therefore, the provisions of entry 99 of Notification 2/2017-CTR are not applicable, and such contributions are not exempt from GST. 6. Eligibility for Input Tax Credit on Heavy Repairs and Maintenance: The applicant sought to claim ITC on expenses for heavy repairs and maintenance that are not capitalized. The judgment referred to Section 17(5) of the CGST Act, which restricts ITC on works contract services for construction of immovable property to the extent of capitalization. It concluded that ITC is not available for such expenses to the extent they are capitalized. Order: 1. GST is payable on contributions received from members. 2. If monthly contributions exceed ?7,500, GST is leviable on the entire amount. 3. GST is applicable on amounts collected for Sinking Fund, Building Repair Fund, and Election and Education Fund. 4. Exempt supplies should be excluded when computing the ?7,500 threshold. 5. Contributions for water supply are not covered under entry 99 of Notification 2/2017-CTR and are taxable. 6. ITC on heavy repairs and maintenance expenses is not available to the extent of capitalization.
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