Whether maintenance charge upto 7500 per month per unit are exempt from ITC reversal

[navnath padwal]

Services provided by a RWA to its members for use of common facilities are exempt under GST where the member contributions are up to ₹ 7,500/- per month (‘threshold limit’). In the initial period, CBIC had issued a flyer in case of co-operative housing societies wherein it was clarified that in case where contributions exceeded the threshold limit, only the differential amounts would be taxable under GST and not the entire amount collected. 

However, a CBIC Circular issued in 2019 states that exemption shall not be available if the contribution collected exceeds the threshold limit and GST shall be applicable on the entire amount collected by the RWA.  Now, this controversy has been settle by The Hon’ble High Court by stating that monthly contribution upto 7500 is exempt  and only differential amount is taxable. 

now question is whether we need to reverse the ITC related to amount upto 7500/- as per section 17*2) of CGST  act, 2017. for the same we check the definition of " exempt supply " as given under section 2(47) of CGST act 2017. 

(47) “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;

we will  see the govt has defined that exempt supply mean supply which nil rated or tax on the same is wholly exempt. therefore one can persume that  maint charge are not wholly exempt , these are partially exempt upto 7500/- per unit per month. 

Therefore my view that we need not require to reverse the proportionately ITC . 

by

CA Navnath Padwal 

Navi Mumbai

Discussions to this article

[DayaShankar Agarwala]

Maintenance charges upto 7500 per month is an exempt supply as per section 11 of the Act. The provisions of section 11 are as follows:

Power to grant exemption from tax.

11. (1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

On perusal of the above section, it clearly mentions that the government can exempt any goods or service subject to such conditions as may be specified. As such, maintenance charge has been exempt subject to the condition that the amount received does not exceed 7500/- per annum. Being an exempt supply, ITC has to be reversed as per rule 42 and rule 43

[navnath padwal]

my point is as per section 17, ITC related to exempt service require to reverse. however what is mean by exempt supply? for the same we have to definition section 2(47) , there govt has used word " Wholly".

[navnath padwal]

monthly contribution is exempt upto 7500/- , however do we need to reverse the ITC related the same as per section 17?

[KASTURI SETHI]

I agree with Sh. Daya Shankar Agarwala Ji.