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TMI Blog2019 (11) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. Section 7(1) of the CGST Act 2017. GST is levied on intra-State and inter-State supply of goods and services. According to section 7 of CGST Act, 2017, the expression supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, and includes activities specified in Schedule II to the CGST Act, 2017. The definition of business in section 2(17) of CGST Act states that business includes provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members. The term person is defined in section 2(84) of the CGST Act, 2017 to include an association of persons or a body of individuals, whether incorporated or not, in India or outside India. The activity of the applicant is a provision of services to its members, and it is in the form of reimbursement of charges or share of contribution and the applicant is a non-profit entity. Taxability of the transaction - HELD THAT:- The service is covered under the Heading 9995. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017, which is related to common input tax credits. For the unrestricted amount of input tax credit, the applicant can avail the benefit of input tax credit. However, this is again subject to the restriction and ineligibilities as enumerated in the Act and rules made thereunder. Liability of GST on the amounts collected for corpus fund from members - HELD THAT:- It is seen that this amount is collected as a deposit and is utilised by the applicant as when required. The contributions are made by the members to the applicant as contributions to the corpus fund and not in relation to any service in particular. The proviso to the above clause states that the deposit given in respect of a future supply shall not be considered as payment made for such supply until the supplier applies such deposit as consideration. In the instant case the corpus / sinking fund so collected is the amount collected towards the future supply of service and accordingly gets applied as consideration towards supply of services only at the time of actual supply of services. Therefore the amounts collected towards Corpus / Sinking Fund do not form part of consideration towards supply of services at the time of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The applicant with regard to liability of GST on the amount of contribution received from its members submits that,- a. The applicant is an "association" within the meaning of Section 3(d) of Karnataka Apartment Ownership Act, 1972. Accordingly, it is an "association" constituted by the statute and is not a "voluntary association". It undertakes administration, maintenance, repair or replacement of the common area pursuant to Section 3 (g) of the Act. The association is performing activities as mandated by the statute and not pursuant to any contract between itself and its members. b. The applicant contends that only such of the activities performed pursuant to a contract are covered within the scope of "supply of goods or services" as described in Section 7 of the Act. It would not cover activities performed pursuant to the Karnataka Apartment Ownership Act, 1972. Since the levy of tax is on the activity of "supply" and because the activities do not amount to "supply" as defined under Section 7 of the CGST Act, 2017, there would not be any incidence of tax on the activities performed by the applicant. c. The applicant further states that Section 10 of the Karnataka Apartment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances where one performs his activities under a statutory mandate. In this regard, the applicant relies on section 7(1) of the Act which delineates the scope of the expression "supply" and section 2(31) of the Act, which explains the scope of the expression "consideration". Therefore, the applicant is of the view that its activities would not amount to supply of any goods or services or both and the contributions received by it from its members towards maintenance of common areas and facilitates will not answer the description of "consideration" given under the Act and hence it would not be liable to pay any tax under the Act. c) The applicant has also extracted the provisions of the Karnataka Apartment Ownership Act, 1972 and section 10 of the said Act provides as follows:- "10. Common profits and expenses.- The common profits of the property shall be distributed among and common expenses shall be charged to, the apartment owners according to the percentage of the undivided interest in the common areas and facilities." d) Thus, the applicant states that statutorily, the association cannot collect and retain any amount from its members which is more than what is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations in which at least one member contributed to more than ₹ 3,000/- per month. The first group was given exemption but the second group was not given any such exemption. Thus, under the above notification, some of the associations enjoyed exemption, while others did not. h) The applicant continued that the above legal position was changed by issuing the Notification No. 25/2012-ST dated 20.06.2012 wherein the Central Government exempted the following taxable services from the whole of service tax,- "28(c) Service by an unincorporated body or 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 upto an amount of five thousand rupees 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." The applicant states that on analysis of the above notification it would reveal that the earlier requirement of classifying the associations into two groups was done away with and instead the benefit of exemption was extended to all the home owner's associations, but with a ceiling. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a & Mahindra Ltd 144 ITR 225 (SC) = 1983 (9) TMI 1 - SUPREME COURT l) The applicant states that there is another dimension to the whole issue. The applicant provides electricity and water, in addition to other facilities to its members, supply of which is exempt from tax under the Act. If the applicant is made liable to pay tax on the entire amount of contributions received by it, it would amount to making it pay tax on the supply of such exempted items as well. This would amount to department trying to tax something which it cannot tax directly and might raise issues regarding constitutional validity. May be for this purpose the authorities have thought it fit to extend the benefit of exemption up to an amount of ₹ 7,500/- per month per member, to all home owner's associations, since all such associations will invariably involve themselves in supplying such exempted items of water and electricity. m) The applicant states that Section 8 of the Act, provides for taxing different kinds of supplies for a single consideration by treating them as composite supplies. It is worthwhile to note that provisions contained in the said section applies only when all such supplies a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are not wholly exempt from tax. Therefore, having regard to the definition of "exempt supply" given in Section 2(47) of the Act, the supplies by the applicant to its members would not be an "exempt supply". They also state that unless the supply amounts to an "exempt supply", the restrictions contained in section 17(2) of the Act do not come into play. Unless the provisions contained in sub-section (2) of section 17 are triggered, there will not be any requirement to restrict the input tax credit. Therefore, the applicant is of the view that notwithstanding the fact that it is not liable to pay tax on contributions to the extent of ₹ 7,500/- per month per member, it would still be eligible to claim credit of the entire input tax. r) The applicant further submits that the concession of ₹ 7,500/- per month per member operates only as a reduction in value of the supply and it will not operate to transform an otherwise taxable supply into an exempted supply. Therefore, the applicant is of the view that it need not restrict any claim of input tax credit merely because it claims exemption from tax on the contributions to the extent of ₹ 7,500/- per month per member. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the personal hearing. We also considered the issues involved on which advance ruling is sought by the applicant and relevant facts. 5.2 At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act. 5.3 The applicant seeks advance ruling in respect of the questions mentioned at para 2 supra. We proceed to answer the questions one at a time sequentially. The Applicant is a Homeowners' Association with 88 members. They maintain the common area, provide lighting in common area, undertakes periodic up-keep of equipments etc.,. They collect annual contributions from its members calculated on the basis of super built-up area owned by the members. 5.4 The first question is with regard to liability of GST on maintenance charges collected by the applicant from its members. The applicant is a registered entity and is an Association of Persons and is distinct from its members. The Association is receiving consideration for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefits to its members. The term person is defined in section 2(84) of the CGST Act, 2017 to include an association of persons or a body of individuals, whether incorporated or not, in India or outside India. Further, Schedule II of CGST Act, 2017 enumerates activities which are to be treated as supply of goods or as supply of services. It states in para 7 that supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of goods. A conjoint reading of the above provisions of the law implies that supply of services by an unincorporated association or body of persons (AOP) to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of services. The above entry in Schedule II is analogous to and draws strength from the provision in Article 366(29A)(e) of the Constitution according to which a tax on the sale or purchase of goods includes a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. 5.7 In view of the above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 CGST. 5.10. Further, in relation to the said exemption, the applicant contends that when the monthly subscription exceeds ₹ 7,500/-, then also they are entitled to claim the said exemption of ₹ 7,500/- and the tax need to be paid only on the remaining amount of monthly contribution. This issue is dealt with and clarified, in the Circular No. 109/28/2019-GST dated 22.07.2019, at para 1, issue 5 and the same reads as under:- The exemption from GST on maintenance charges charged by a Resident Welfare Association (RWA) from resident is available only if such charges do not exceed ₹ 7,500/- per month per member. In case the charges exceed ₹ 7,500/- per month per member, the entire amount is taxable. For example, if the maintenance charges are ₹ 9,000/- per month per member, GST @ 18% shall be payable on the entire amount of ₹ 9,000/- and not on ₹ 1,500/-. [₹ 9,000-₹ 7,500/-] In view of the above, the exemption of ₹ 7,500/- is not available when the maintenance charges exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;" The proviso to the above clause states that the deposit given in respect of a future supply shall not be considered as payment made for such supply until the supplier applies such deposit as consideration. In the instant case the corpus / sinking fund so collected is the amount collected towards the future supply of service and accordingly gets applied as consideration towards supply of services only at the time of actu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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