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TMI Blog2020 (9) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HE KGST ACT, 2017 1. M/s. Gnanaganga Gruha Nirmana Sahakara Sangha Niyamitha No. 365, 10 th Cross, C Block, J P Nagar, Mysore-570008, GSTIN: 29AAAAG2275L2ZF, (hereinafter referred to as the applicant ) is a Housing Society registered under the Karnataka Co-Operative Societies Act filed an application for Advance Ruling under Section 97 of the CGST Act, 2017 read with Rule 104 of the CGST Rules and Section 97 of the KGST Act, 2017 read with Rule 104 of KGST Rules 2017, in FORM GST ARA-01 and discharged the fee of ₹ 5,000/- each under the CGST Act and the KGST Act. FACTS OF THE CASE 2. The applicant is a Housing Society registered under the Karnataka Co-Operative Societies Act., engaged in the development and sale of Sites for its members. Applicant submitted that the process of formation of Sites involves identification of land, which may be an Agricultural land and this agricultural land has to be converted into non-agricultural land from the prescribed authority. Further society has to secure plan approval from the appropriate Planning authority and execute the works like marking of the sites, formation of the roads, preparing and leveling of the roads, asphal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount from its members for maintenance of the sites in the layout till the local Municipal Administration takes-over the sites formally. 5. In view of the above, applicant seeks advance Ruling on the following; 1. 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. 2. If answer to question no.(1) above is yes then, 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? 3. 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? 4. 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 maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST 9. We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by Sri Rajeev H. V. President of the M/s nanaganga Gruha Nirrnana Sahakara Sangha Niyamitha during the personal hearing. We also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts and the applicant s interpretation of law. 10. On verification of the nature of the activity carried out by the applicant it was observed that applicant is a House Building Co-operative Society registered under the Karnataka Co-operative Societies Act. First, we have to decide whether the applicant is a housing society or not. Housing Society is not defined under the GST Act. As per section 2(16) of the Maharashtra Co-operative Society Act, 1960 housing society means a society, the object of which is to provide its member with open plots for housing, dwelling houses or flats; or if open plots, the dwelling houses or flats are already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CGST Act 2017, 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 is a business . 13. Further, we shall examine whether the activity undertaken by the society regarding the maintenance of layout be treated as supply in terms of Section 7(1)(a) of the CGST Act 2017 or not. Section 7(1)(a) of the CGST Act, 2017 stipulates that any transaction to get qualified as supply , must contain the following three components. i. The transaction must involve a supply of goods or services or both, such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made. ii. The transaction must be for a consideration iii. The transaction must be in the course or furtherance of business 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 15. Further, the applicant being the housing society falling 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. The said entry reads as under: Sl.No. Chapter, Section, Heading. Group or Service Code (Tariff) Description of services Rate (per cent) Condition 77. Heading 9995 Service by an 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- (a)... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant extract of the notification is as under: Water [other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container] is exempt from GST . Therefore 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 as supra. 17. Further with respect to fourth question it was submitted by the applicant that they are collecting lump-sum amount from its member who are selling their sites as fund and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification No. 11/2017- Central Tax (Rate) dated 28.06.2017. Hence 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. Further, the endowment fund belongs to the applicant society and interest gets accrued to this fund. The amount spent out of this fund which belongs to all members, is for providing services to all the members and there is an express provision that any amount left as balance in the fund at the time of handover of the layout to the civic authorities, would be distributed to all the members, the amount debited to this account should also be taken proportionately as contribution of each the member and this should be reckoned while calculating the threshold of ₹ 7,500-00 per member per month. 18. Further, the applicant contended about applicability of exemption under entry No. 77 of Notification No. 12/2017-CentraI Tax (Rate) dated 28.06.2017 as amended by the Notification No.2/2018-dated 25-01-2018. The said entry reads as under: Sl.No. Chapter, Section, Heading. Group or Service Code (Tariff) D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monthly basis is exempt from the levy of GST as per entry 99 of the Notification No. 2/2017-Central Tax (Rate) dated 28th June, 2017. If the applicant collects water charges as a part of service provided without being shown separately on the basis of usage and sourcing it from both the contributions and endowment fund, then the same should be added to the total consideration of services and apportioned which determining the threshold for the purpose of taxing or exemption as per the entry No.77 of Notification No. 12/2017- Central Tax (Rate) date d 28.06.2017 as amended by the Notification No.2/2018-dated 25-01-2018. 4. The amount collected from the member who is selling the site and ceases to be a member, as endowment fund is liable to tax under GST. 5. 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 is applicable to the applicant only to the extent of amount of Rupees Seven thousand five hundred per month per member collected by way of reimbursement of charges or share of contribution for sourcing of goods or services from a third person for the common use of its members. - - Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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