2022 (6) TMI 251 - AAR - GST

Levy of GST - Valuation - Resident Welfare Association (RWA) collecting monthly maintenance charges, certain annual fee by name sinking fund and charges for electricity used in common area - GST on monthly collection not exceeding Rs.7500 per member as total collection of the society is more than Rs.20 lakhs a year - GST on total monthly maintenance of Rs.7500 per member plus annual sinking fund collected in July or august month in which annual sinking fund will be collected due to monthly collection including annual sinking fund exceeding Rs.7500 per member for that month or only on sinking fund which is over and above Rs.7500 per member - GST on monthly collection of common area electricity charge paid by the members in addition to the Rs.7500 monthly maintenance charged on the basis of actual bill divided by carpet area of 9,01,913 sq. ft pro rata charged to respective member s flat carpet area. HELD THAT - The Serial No. 77 of Notification No. 12/2017 as amended vide Notification No. 02/2018 dt 25.01.2018 states that service by an unincorporated body or a non-profit entity to its own members is exempt upto an amount of Rs. 7500 per member for sourcing goods or services from a 3rd person for the common use of its members in a housing society or a residential complex. Therefore where the aggregate turnover of a Residents Welfare Association (RWA) exceeds Rs.20 lakhs in a financial year and the amount collected for maintenance per member exceeds Rs.7500/- then the entire amount is chargeable to GST at the rate of 18% - Further even if the annual turnover of the RWA is greater than Rs.20 lakhs but the monthly maintenance charged per person is Rs. 7500/- or less, then such RWA need not pay tax on the amounts so collected. Any amounts collected periodically along with the monthly maintenance charges are covered under Entry 77 of Notification No. 12/2017. Therefore they are taxable if the total amount collected by the RWA, by whatever name i.e., monthly maintenance or sinking fund etc., exceeds Rs.7500/-. Therefore the total amount collected in July or august month by RWA from the members i.e., the monthly maintenance charge plus sinking fund amount is liable to tax if it exceeds Rs.7500/-. Nevertheless, GST is not leviable on electricity and water charges collected from residents.

Summary

Issues:
1. Applicability of GST on monthly collection not exceeding Rs.7500 per member in a society with total collections exceeding Rs.20 lakhs a year.
2. Applicability of GST on total monthly maintenance plus annual sinking fund collected when it exceeds Rs.7500 per member.
3. Applicability of GST on monthly collection of common area electricity charges in addition to monthly maintenance.

Analysis:
1. The Resident Welfare Association (RWA) sought clarification on the GST applicability for various collections. The ruling clarified that if the maintenance charges per member exceed Rs.7500 and the aggregate turnover surpasses Rs.20 lakhs, GST at 18% is levied on the entire amount, not just the difference. However, if the monthly charge per member is Rs.7500 or less, no tax is applicable even if the annual turnover exceeds Rs.20 lakhs.

2. The ruling further explained that any amounts collected periodically along with the monthly maintenance charges are taxable if the total exceeds Rs.7500 per member. Thus, the total amount collected in a month, including sinking fund, is liable to GST if it surpasses Rs.7500. However, GST is not imposed on electricity and water charges collected from residents.

3. The Authority's decision on the three questions raised by the RWA are as follows:
- On the first question regarding monthly collection not exceeding Rs.7500 per member, the ruling is "No."
- On the second question about the applicability of GST on total monthly maintenance plus annual sinking fund exceeding Rs.7500 per member, the ruling is "Yes."
- On the third question concerning the monthly collection of common area electricity charges in addition to the monthly maintenance, the ruling is "No."

This detailed analysis provides a comprehensive understanding of the judgment, addressing each issue raised by the RWA and the corresponding rulings provided by the Advance Ruling Authority.