2023 (10) TMI 469 - AAR - GST

Exemption from GST - common area electricity charges are collected from the members on actual basis - Collection of advance maintenance charges from members - electricity charges being collected and totally paid to the electricity department - threshold limit for collection of GST in case of collections from member of Resident Welfare Association - N/N. 12/17-CT dated 28.06.2017. Common area electricity charges are collected from the members on actual basis - electricity charges being collected and totally paid to the electricity department - HELD THAT - A combined reading of the N/N. 02/2017 dated 28.06.2017 and the rule 33 of CGST Rules reveals that the cost of electrical energy supplied by the applicant to its members as a pure agent is not taxable at the hands of the applicant. So also by the notification cited above the electrical energy as such remains exempt from taxation and cannot be combined with others supplies being made by the applicant as a composite supply because a composite supply by definition should consist of two or more taxable supplies. Collection of advance maintenance charges from members - HELD THAT - The Section 13 (2) of the CGST Act enumerates that the time of supply of services shall be the earliest of the date of issue of invoice or the date of receipt of payment. Section 31 (2) states that a registered person supplying taxable services shall issue a invoice either before or after the provision of service. A combined reading of both would make it clear that as an invoice can be issued even prior to provision of a service a time of supply of service will be the date of receipt of advance. Further, vide notification no. 66/2017 Central Tax dated 15th November, 2017, specific exemption from the payment of GST on advance receipt has been granted to the supplier of goods - advances received towards the supply of a service have to be reported in the GSTR-1/GSTR-3B for the relevant tax period and the liability needs to be discharged in GSTR-3B. Threshold limit for collection of GST in case of collections from member of Resident Welfare Association is Rs. 7500/- - 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.2 0 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%. For example if the maintenance charges are Rs .9000 per month per member, GST @18% shall be payable on the entire amount and not on the difference amount. Further even if the annual turnover of the RWA is greater than Rs. 20 lakhs but the monthly maintenance charged per person is less than Rs. 7500/-, then such RWA need not pay tax on the amounts so collected - Therefore they are taxable if the total amount collected by the RWA equal or exceeds Rs. 7500/-.

Summary

Issues Involved:

1. GST exemption on common area electricity charges.
2. GST on advance maintenance charges.
3. GST exemption on electricity charges collected and paid to the electricity department.
4. GST applicability on contributions exceeding the threshold limit for Resident Welfare Associations (RWA).

Summary:

Issue 1: GST exemption on common area electricity charges

The applicant, a mutually aided cooperative society, collects common area electricity charges from its members and pays them to the Electricity Department without any additional amounts. As per Section 11(1) of the CGST Act 2017 and Notification No. 02/2017 dated 28.06.2017, the supply of electrical energy is exempt from GST. Rule 33 of the CGST Rules, 2017, supports this by excluding costs incurred by a supplier as a pure agent. The applicant qualifies as a pure agent, and thus, the common area electricity charges are exempt from GST.

Issue 2: GST on advance maintenance charges

According to Section 13(2) and Section 31(2) of the CGST Act, the time of supply of services is the earliest of the date of issue of invoice or receipt of payment. Therefore, GST on advance maintenance charges should be reported in the GSTR-1/GSTR-3B for the relevant tax period, and the liability needs to be discharged at the time of receipt of the advance.

Issue 3: GST exemption on electricity charges collected and paid to the electricity department

The applicant acts as a facilitator, collecting electricity charges based on individual consumption measured by sub-meters and paying the total cost to the Electricity Department. As per the same reasoning in Issue 1, since the applicant is a pure agent and the supply of electricity is exempt under Notification No. 02/2017, these electricity charges are also exempt from GST.

Issue 4: GST applicability on contributions exceeding the threshold limit for Resident Welfare Associations (RWA)

Notification No. 12/2017 as amended by Notification No. 02/2018 states that services by an unincorporated body or non-profit entity to its members are exempt up to Rs. 7500 per month per member. If the monthly contribution exceeds Rs. 7500, GST is chargeable on the entire amount at 18%. Therefore, if the maintenance charges exceed Rs. 7500 per month per member, GST should be collected on the total contribution.

Rulings:

1. Common area electricity charges collected on an actual basis are exempt from GST.
2. GST on advance maintenance charges should be deposited at the time of receipt of the advance.
3. Electricity charges collected and paid to the electricity department are exempt from GST.
4. If the monthly contribution exceeds Rs. 7500, GST should be collected on the total contribution.