2020 (9) TMI 737 - AAR - GST

Levy of GST - activity of maintaining the facilities at the layout from the funds collected from the members of the Society - Service or not? - GST for the amount pertaining to the un-expired period - Recovery of cost of water from members on monthly basis - collection of lump-sum amount as endowment fund, the proceeds of which would be utilized for maintenance charges in terms of the maintenance - Exemption in terms of N/N. 12/2017 entry no 77 respect of the value of the maintenance amount collected from the members of the society to the extent of ₹ 7,500/-. Is the activity of maintaining the facilities at the layout from the funds collected from the members of the Society a service attracting GST Maintenance involves upkeep and maintenance of amenities and due to the length of the period roads, drainages and other UGD facilities need to be re- done/ re-constructed? - HELD THAT - In the instant case, the applicant is involved in the providing layout maintenance service to its members by supplying goods or services and hence the first condition is satisfied. The applicant has rightly admitted that they are receiving the amount from its members as consideration towards the maintenance of the layout and hence the second condition is also satisfied - the facilities or benefits provided by the applicant to its member for consideration is a business as per section 2(17) of the CGST Act 2017 and hence the third condition is also satisfied. Hence the activity of maintenance of layout by the applicant amounts to supply in terms of Section 7 (1)(a) of the CGST Act 2017 - as applicant has rightly admitted that they are collecting maintenance charges from its member, either annually or once in 10 years and said amount is utilized for the maintenance of the layout. The liability to pay tax on services shall arise at the time of supply as per the provisions of sub section (1) of section 13 of the CGST Act, 2017. The time of supply of service in this case is earliest of the date of issue of invoice to the applicant or date of receipt of payment by the service provider. It is also seen that the applicant is bound to refund to its members the amount unutilised at the time of transfer of the entire property to the civic authorities. Therefore, going by the nature of the money collected, it is only in the form of deposit and does not take the character of advance for the services provided. Hence, mere collection and deposit of money does not qualify either as supply of goods as per section 2(52) or as supply of service as per section 2(102) of the CGST Act, 2017 and taxability of the goods or services or both arises only at the time of supply of goods or supply of service or both. Thus the extent of amount utilized by the applicant towards the payment at the time of supply of service by the third person, such amount is liable for GST as per subsection (1) of section 9 of the CGST Act, 2017. Does the Society s collection of sum towards maintenance charges calculated on yearly basis in one lump-sum for certain length of time say 10 years, should the GST be paid even for the amount pertaining to the un-expired period? - HELD THAT - The services provided by the unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution up to an amount of seven thousand five hundred per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex is exempted from the levy of GST. Since the applicant being the housing society, this exemption is also applicable to the applicant. The Society is collecting Water charges from the residents for recovery of charges for water. The entire cost of the water is recovered from the members on monthly basis, does it attract GST? - HELD THAT - The applicant is collecting water charges from the residents of the layout towards the cost of pumping water from bore wells to overhead tank and also for management and maintenance of water distribution systems to each individual houses. The applicant is collecting water charges on monthly basis. The supply of water is exempted from the GST as per entry no. 99 of the Notification No. 2/2017 -Central Tax (Rate) dated 28th June, 2017 - the supply of water is exempt from GST and the applicant is not liable to pay GST on water charges. However, it is not clear from the submission of the applicant that whether the applicant is collecting water charges separately from its members or it is included in total contribution. If water charges are collected separately, then it falls in entry 99 of the Notification No. 2/2017 -Central Tax (Rate) dated 28th June, 2017 which is exempt from the levy of GST. In case water charges are included in the total contribution of each individual member in each month then it is covered under the entry No.77 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 as amended by the Notification No.2/2018-dated 25-01-2018 and the exemption or taxability is determined. Does the society have to pay GST for collecting lump-sum amount as endowment fund, the proceeds of which would be utilized for maintenance charges in terms of the maintenance as indicated in Appendix A above, of the layout with an express condition that the amount would be returned to the Site owners upon the taking over of the layout by the local body as the Society would be utilizing only accretions to the endowment fund from year to year? - HELD THAT - In the instant case the applicant is collecting amount from the member who is selling the site and that amount is kept as endowment fund. The applicant utilising the proceeds/ accretions of the endowment fund for sourcing goods or service from the third person for the common use of its members. This amount does not amount to the contribution or reimbursement of amount from its members. The exemption under entry 77 (c) of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 as amended by the Notification No.2/2018-dated 25-01-2018 is available only when the applicant receives the amount from its members as contribution or reimbursement against the amount paid by the applicant for sourcing of goods or services from the third person for common use of its members. Since the applicant utilizing the amount which is collected from the member who are selling their sites, such contribution is not for providing any maintenance services, instead he is providing no-objection certificates and other clearances for the site sellers. Hence this amount when collected amounts to a service and the applicant is liable to pay GST at the rate of 18% as such services are unclassified services covered under entry no. 35 of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 - the contributions of the members who are selling the sites and obtaining clearances from the applicant for such sale, are liable to tax under the GST Acts. In the event that any or all of the items from (1) to (4) is rendered taxable whether the same is exempt under Notification No. 12/2017 entry no 77 respect of the value of the maintenance amount collected from the members of the society to the extent of ₹ 7,500/- (Rupees Seven thousand five hundred) per month? - HELD THAT - Applicability of exemption under entry No. 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended by the Notification No.2/2018- dated 25-01-2018 is discussed in detail in above paras and this entry applicable to the applicant only when the they have provided services to its own members by way of reimbursement of charges or share of contribution up to an amount of seven thousand five hundred per month per member for sourcing of goods or services from a third person for the common use of its members.

Summary

Issues Involved:
1. GST applicability on maintenance charges collected from members.
2. GST applicability on lump-sum maintenance charges collected for a long period.
3. GST applicability on water charges collected from residents.
4. GST applicability on lump-sum endowment fund collected from members selling their sites.
5. Applicability of exemption under Notification No. 12/2017 for maintenance charges.

Issue-wise Detailed Analysis:

1. GST Applicability on Maintenance Charges Collected from Members:
The applicant, a housing society, provides maintenance services to its members, which include upkeep of roads, parks, and utilities. The authority determined that these activities qualify as "business" under Section 2(17) of the CGST Act, 2017. The maintenance services provided by the applicant constitute a "supply" under Section 7(1)(a) of the CGST Act, 2017, as they involve the provision of services for consideration in the course of business. Therefore, the activity of maintaining the facilities at the layout from the funds collected from the members of the Society is a service attracting GST.

2. GST Applicability on Lump-sum Maintenance Charges Collected for a Long Period:
The applicant collects maintenance charges either annually or once every ten years. The time of supply of services is determined by the earliest of the date of issue of the invoice or the date of receipt of payment. The collected amount is considered a deposit until utilized for maintenance services. The ruling clarified that the amount utilized for sourcing goods or services from third parties is liable for GST. However, if the amount utilized per member per month does not exceed ?7,500, it is exempt under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 2/2018 dated 25.01.2018. If the amount exceeds ?7,500, the entire amount is taxable.

3. GST Applicability on Water Charges Collected from Residents:
The applicant collects water charges separately on a monthly basis for the cost of pumping and maintaining the water distribution system. The supply of water (except certain specified types) is exempt from GST under entry no. 99 of Notification No. 2/2017-Central Tax (Rate) dated 28th June 2017. If water charges are included in the total contribution without being shown separately, they must be considered while determining the threshold for exemption under entry No. 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

4. GST Applicability on Lump-sum Endowment Fund Collected from Members Selling Their Sites:
The applicant collects a lump-sum amount from members selling their sites, which is kept as an endowment fund for major maintenance works. This amount is refundable when the layout is handed over to the local body. The ruling clarified that this collection does not qualify for exemption under entry 77(c) of Notification No. 12/2017-Central Tax (Rate) as it is not a reimbursement or contribution for sourcing goods or services. Instead, it is considered a service for providing no-objection certificates and other clearances, attracting GST at 18% under entry no. 35 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.

5. Applicability of Exemption under Notification No. 12/2017 for Maintenance Charges:
The exemption under entry No. 77 of Notification No. 12/2017-Central Tax (Rate) is applicable to the applicant only if the maintenance charges do not exceed ?7,500 per month per member. If the charges are collected annually or once in ten years, the amount utilized for maintenance in a particular tax period must be divided by the number of members to determine if it exceeds the ?7,500 threshold. If it does, the entire amount is taxable; otherwise, it is exempt.

Ruling Summary:
1. Maintenance activities funded by member contributions attract GST.
2. Lump-sum contributions for maintenance are taxable if the utilized amount per member per month exceeds ?7,500.
3. Water charges collected separately are exempt from GST; if included in total contributions, they are subject to the ?7,500 threshold for exemption.
4. Lump-sum endowment funds collected from members selling their sites are taxable at 18%.
5. Exemption under Notification No. 12/2017 applies only if the maintenance charges do not exceed ?7,500 per month per member.