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TMI Blog2019 (11) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 12/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 2/2018 - Central Tax (Rate) dated 25.01.2018 is available for an amount, up to ₹ 7,500/- per month per member, collected for sourcing of goods or services from a third person for common use of the members. If exemption is available, whether it is available on per member basis or per flat basis, as some members could have more than one flat? - Circular No. 109/28/2019-GST dated 22.07.2019 - HELD THAT:- The Circular clarifies that As per general business sense, a person who owns two or more residential apartments in a housing society or a residential complex shall normally be a member of the Residential Welfare Association (RWA) for each residential apartment owned by him separately. The ceiling of ₹ 7,500/- per month per member shall be applied separately for each residential apartment owned by him - in the applicant's terms, the exemption is applicable to eligible members on per flat basis. Whether the exemption as per entry no 77 of Notification 12/2017 Central Tax (Rate) is a standard exemption that can be claimed irrespective of amount collected towards maintenance? - Circular N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 collection and hence is are not liable to GST, at the time of collection. However the amounts so utilized for provision of service are liable to tax at the time of actual supply of service. - KAR ADRG 42/2019 - - - Dated:- 17-9-2019 - SRI. HARISH DHARNIA, AND DR. RAVI PRASAD M.P. MEMBER Represented by: Sri Chandrashekar, Chartered Accountant ORDER UNDER SECTION 98(4) OF THE CENTRAL GOODS SERVICES TAX ACT, 2017 AND UNDER 98(4) OF THE KARNATAKA GOODS SERVICES TAX ACT, 2017 M/s. Prestige South Ridge Apartment Owners' Association, Survey No. 125, Prestige South Ridge Apartment, BSK 3rd Stage, Hosakerehalli, Bengaluru 560085, having GSTIN number 29AACAP8249H1Z4 have filed an application for Advance Ruling under Section 97 of the CGST Act,2017 KG ST Act 2017 read with Rule 104 of CGST Rules, 2017 and KGST Rules 2017, in FORM GST ARA-01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he maintenance charges on its members. It is a non-profit organisation. 3.3 Based on area of occupancy, some of the members pay more than ₹ 7,500/- per month and members of few units pay less than ₹ 7,500/- per month towards maintenance charges. Collection of maintenance charges is done on a quarterly basis. 3.4 The applicant procures the following goods and services, - (a) Security Services (b) Housekeeping materials (c) Landscaping Services (d) Water Supply for maintenance work (e) Repair and Maintenance of various assets (f) Building Insurance (g) Professional Services (h) Fuel Expenses (i) Outdoor Catering Services (j) Pest Control Services (k) Sewage Treatment Plant Servicing 3.5 The applicant states with regard to Electricity charges that separate electricity meters are installed to record the consumption of electricity of individual flats and each of the units directly pay to the Electricity Supply Corporations. Further, the applicant pays electricity charges and recovers the amount from each of the units for power consumed towards lighting the common area of the apartment, including parks, com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there cannot be a GST liability on maintenance charges collected from members. 5. The applicant, with regard to the issue of applicability of the exemption under entry no.77 of Notification No.12/2017 - Central Tax (Rate) to the maintenance charges collected from members, submits that if the activity in question is liable to GST, then the exemption would be applicable to them. The entry of exemption reads as under: Service by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its members by way of reimbursement of charges or share of contribution - (a) As a trade union; (b) For the provision of carrying out any activity which is exempt from the levy of Goods and Services Tax; or (c) Up to an amount of seven thousand five hundred 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 6. The applicant contends that the exemption under entry 77 of Notification No. 12/2017 - Central Tax (Rate), is a standard exemption that can be claimed irrespective of the amount collected towards maintenance, i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as taxable as per the FAQs on levy of GST on supply of services to the Co-operative Society- reg dated 05-09-2017 issued by the CBIC. (c) Also considering the electricity (HSN 2716 00 00) as exempted goods as per entry no. 104 of Notification No.2/2017- Central Tax (Rate) dated 28.06.2017, a recovery of an amount towards the said charges cannot be taxed. 9. The applicant, with regard to the issue of applicability of GST on Corpus Fund collected, states that the Corpus Fund or Sinking Fund is an amount set aside for meeting an unplanned or planned future capital outlay. The applicant is of the view that it is an amount collected and kept aside without being used, until the event requiring its use occurs. There is no supply of goods or services, by the applicant, and collection of corpus fund or sinking fund is only a transaction in money, which is kept outside the definition of goods or services . PERSONAL HEARING: / PROCEEDINGS HELD ON 31.12.2018 10. Sri Chandrashekar B D, Chartered Accountant and authorised representative of the applicant appeared for personal hearing proceedings held on 31.12.2018, reiterated the facts narrated in their application an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members (c) Section 7(1) of the CGST Act 2017 deals with the Scope of Supply and stipulates that for the purposes of the said Act, the expression supply includes all forms of supply of goods or services or both made or agreed to be made for a consideration by a person in the course or furtherance of business. 11.4 In view of the above, the applicant association is supplying the services of maintenance of the common areas including repairs and upkeep and since the common areas belongs all apartment owners, the maintenance charges are charged on the basis of the ratio of area of each apartment to the total area of all apartments and hence the applicant is providing a service of maintenance of apartments, buildings and property to all members and this is in the course of business. Hence this would amount to a taxable supply of services. 11.5. The second question is with regard to applicability of exemption under entry number 77 of Notification No.12/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 2/2018 - Central Tax (Rate) dated 25.01. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged 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 exceed ₹ 7,500/- per month per member. Therefore the members are required to discharge GST on the entire maintenance charges and not on just the amount in excess of ₹ 7500/-. The same ratio applies to the earlier period when the exemption was available on maintenance charges upto ₹ 5000/-. 11.8 The fifth question is relation to taxability of the amounts recovered from members, which were paid by the applicant towards electricity charges to BESCOM, the electricity supply authority, for the electric power consumed towards common facilities. The applicant, in this regard, admitted that they pay electricity charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducement 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: 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 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 collection and hence is are not liable to GST, at the time of collection. However the amounts so utilized for provision of service are liable to tax at the time of actual supply of service. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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