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TMI Blog2021 (12) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses incurred for heavy repairs and maintenance of the society building premises and which are not capitalized in books of accounts - principles of mutuality. Whether the applicant is liable to pay GST on the contribution received from its members? - HELD THAT:- The applicant society and its members are distinct persons and the various charges received by the applicant from its members are nothing but consideration received for supply of goods/services as a separate entity. The principles of mutuality, which has been cited by the applicant to support its contention that GST is not leviable on the maintenance charges collected by them from its members, is not applicable in view of the amended Section 7 of the CGST Act, 2017 and therefore, the applicant has to pay GST on the said amounts received against maintenance charges, from its members. There is a marked difference in the concept of the levy between the Finance Act and the CGST Act. In terms of the Finance Act, it was sufficient that a service was rendered by one person to another for a consideration in the taxable territory for the levy of service tax to be attracted. However, under GST, the supply of the service should ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng but collection of certain amount as maintenance advance for overall maintenance of society. Hence, the said amount is liable to tax. The fund once collected becomes the property of the society. The individual member does not have right over the said money. So to call it as a deposit will be misnomer. It is a charge by the society for specific purpose and said charge is authorized by the general body and is as per the other provisions of the co-operative law. Some-times it may be a percentage of maintenance amounts. Similarly with regard to question regarding election and education fund collected by the applicant, we find that the same are liable to tax. Whether the supplies otherwise exempted from tax or charged at Nil rate shall be included in value in computing threshold amount of 7, 500/- per month per member under entry no. 77 of Notification no.12/2017-CTR dated 28th June, 2017, for determining the tax liability? - HELD THAT:- As per clause (b) in Sr No 77 of said Notification, exemption is available to housing societies for provisions of carrying out any activity which is exempt from the levy of Goods and service Tax assuming that a housing society is a non-profit register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as "the CGST Act and MGST Act" respectively] by M/s Mahindra Splendour CHS Ltd., the applicant, seeking an advance ruling in respect of the following questions. 1. Whether the applicant is liable to pay GST on the contribution received from its members? 2. If yes, whether the applicant can avail the benefit of exemption under entry no. 77 of Notification no.12/2017-CTR dated 28th June, 2017 for the value upto ₹ 7,500/- per month per member and in case the said monthly contribution exceeds ₹ 7,500/- per month, then the GST is leviable only on differential value in excess of ₹ 7,500/-? 3. Whether the applicant is liable to pay GST on amount collected from its members towards the following accounts as per the Bye laws: a. Sinking Fund b. Building Repair Fund c. Election and Education Fund 4. Whether the supplies otherwise exempted from tax or charged at Nil rate shall be included in value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2(93), etc., determines that where consideration is involved in a transaction, the recipient is the 'person" who pays consideration to the supplier. Hence, 2 different persons have been envisaged in the law to tax a transaction of supply of goods or services or both in course of business or furtherance of business made for a consideration. 2.4 However, nowhere under the GST Act, the members and the society are treated as distinct persons. Therefore, the society and its members are not distinct person. Hence, the impugned transaction between the association and its member do not get covered under section 7(1)(a) of the Act and the contribution / fund raised from the members is collected for benefit of all the members and to foster society's objectives. 2.5 Applicant, in support of the applicability of the principle of mutuality in its case, are relying on the following decisions:- i. Hon'ble Jharkhand High court in case of Rancid Club Ltd. v. Chief Commissioner; ii. Hon'ble Mumbai CESTAT in case of Cricket Club of India Ltd. v. Commr of Service Tax; iii. Hon'ble Gujarat High Court in the case of Sports Club of Gujarat Ltd v. UOI; iv. Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like that of water, electricity, repairs and maintenance, administrative expenses etc. which are incurred for the maintenance and upkeep of the common area and amenities used by the members. 2.13 MOF vide circular no. 109/28/2019-GST dated 22nd July, 2019 in Para 5 has clarified that exemption under entry 77(c) shall be applicable only if contribution is upto ₹ 7,500/ and if it is more than ₹ 7,500/- then entire contribution shall be leviable to GST. 2.14 Clarification given by above circular is contrary to the exemption notification. In applicant's view, contribution only in excess of ₹ 7,500/- per member per month is leviable to GST. When the words used in exemption entry draws literal interpretation, restricted meaning given by a circular to the same is non-est in law. The exemption entry clearly provides that "upto an amount of ₹ 7,500/- per month per member" there would be no leviability of GST on the same. Drawing legislative intent from the erstwhile service tax law it is beyond doubt that in case of monthly contribution from member exceeds ₹ 7,500/ then it is only differential amount in excess of ₹ 7,500/- is leviable to GST. III. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notification 2/2017-ctr under HSN Code 2201. 2.19 Applicant maintains a pumping and a storage system, to supply water to each flat. The water charges paid by applicant to MCGM, are recovered from the members. Also, applicant has inbuilt sewerage treatment plant by which the waste water generated in house is treated and then re-used for non potable purposes such as toilet flushing etc. 2.20 Water qualifies as goods as defined under Section 2(52) of the CGST Act. Further, the Applicant procures the water from MCGM and supplies the water 'as such' to the members of the society. The water supplied by the Applicant is normal potable water supplied by MCGM and treated water from STP Plant. In view of entry 99 of above notification 2/2017-CTR supply of water (including supply of water treated in STP) by the applicant to society shall be charged at Nil rate of GST i.e. is exempted from levy of GST. VI. ITC is eligible on heavy repairs and maintenance expenditure incurred, which are not capitalized in the books of accounts 2.21 The applicant society proposes to incur expenditure on repairs and maintenance of the civil structure of building and its premises to improve the dila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant. The jurisdictional / concerned officer has neither appeared for the hearings nor has made any submissions in the matter. 5.2 M/s Mahindra Splendour Co-operative Housing Society Ltd, the Applicant is a housing society located at Bhandup, Mumbai which manages, maintains and administers the society's property and raises funds for achieving the objects of the society, as provided in its Bye-Laws. The funds are raised by collecting contributions/charges from members of the society which include: (a) Property taxes, (b) Maintenance charges, (c) Water and electricity charges, (d) Sinking Fund, Building repair Fund, etc. To manage and maintain its property, the applicant procures goods and services from third party vendors. We now deal with the questions raised by the applicant as under:- 5.3.1 Question No. 1:- Whether the applicant is liable to pay GST on the contribution received from its members? 5.3.2 The applicant has submitted that the society and its members are not distinct persons and on the principle of mutuality since they are one and same person, the impugned transactions between the applicant society and its members are not liable to tax under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the society complex by procuring the services and goods from third parties, benefits every member of the Society and hence it can be said that there is a service rendered by the Applicant to its members. 5.3.7 To be taxable under GST laws, the services must be supplied in the course or furtherance of their business. The term 'business' is defined under Section 2(17) of the CGST Act and includes,- …………………….. e) 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; …………………….. 5.3.8 Clause (e) of the Business definition is relevant and it is clear from the said clause that the activity of providing facilities or benefits by an association to its members for a subscription is a business under GST Act. Hence the transactions between the association and its members is a service. 5.3.9 Further, Section 2(31) of the CGST Act states that 'Consideration' in relation to the supply of goods or services includes,- (a) any payment made or to be made, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta Club Ltd (Civil Appeal No 4184/2009) wherein it is stated that supplies made to its members by the member associations, both incorporated as well as unincorporated, are governed by the principal of mutuality and therefore they cannot be charged to tax, be it as tax on sale of goods or as a tax on supply of service. We find that the Hon'ble Supreme Court has decided on two issues relating to taxability of sale of goods and provision of services by member's club to their members. 5.3.13 With respect to services, we find that the decision of the Supreme Court was rendered in the context of the provisions of the Finance Act, 1994 under which, the taxable event in terms of Section 66B was on services 'provided or agreed to be provided by one person to another'. Under GST, the taxable event is the "supply" of goods or services or both. As already mentioned above, the activities undertaken by the applicant are covered under the amended definition of 'supply'. Further, under the GST laws, the term 'business' has been specifically defined in Section 2(17) of the CGST Act to include provision by a club, association, society or any such body (for a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of contribution- (a)…………………………… (b) For the provision of carrying out any activity which exempt from the levy of Goods and services Tax or (c) 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 Nil Nil 5.4.3 The exemption as per the entry 77 of the Notification No 12/2017 CT (R) is available only when a member's contribution per month is upto an amount of ₹ 7,500/-. A member who contributes an amount which is more than ₹ 7,500/-, will not be eligible for the exemption under entry No 77 and the entire contribution amount will be liable to be taxed. Hon'ble Supreme Court of India, Constitution Bench of Five Judges in the case of Commissioner of Customs (Import) Mumbai Vs. M/s Dilip Kumar and Company and Ors (Civil Appeal No. 3327 of 2007) has held that the benefit of ambiguity in exemption notification cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue/state. Exemption notifications are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies such deposit as consideration for example, in the instant case the repair/ sinking fund so collected is the amount collected towards the future uncertain supply of service and accordingly gets applied as consideration towards supply of services only at the time of actual supply of services. 5.5.3 Whereas the applicant has stated that the said funds collected, are not in relation to procurement of any goods/service in particular they have also submitted that the amounts in the said fund gets applied as consideration towards supply of services only at the time of actual supply of services. According to the applicant there is a supply of services in the instant case and the collected fund gets used accordingly for provisions of such services. 5.5.4 Applicant has submitted that, the proviso to Section 2(31) of the CGST Act states 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 the deposit as consideration for the said supply. 5.5.5 We find that, the amount towards sinking/repair fund is collected as per percentage fixed in its bye-laws and as per the various circulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the following exemption to housing societies: 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)…………….; (b) for the provision of carrying out any activity which is exempt from the levy of Goods and service 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. 5.6.3 The applicant has submitted that certain statutory dues such as property tax, electricity charges etc, form part of the monthly maintenance bill raised by the society on its members. 5.6.4 As per clause (b) in Sr No 77 of said Notification, exemption is available to housing societies for provisions of carrying out any activity which is exempt from the levy of Goods and service Tax assuming that a housing society is a non-profit registered entity; and property tax and electricity, etc. are exempt from the levy of GST. Thus, charges, collected by the society on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant portion of sub-section 5 of Section 17 of CGST Act, 2017 in this, regard is reproduced below:- "(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation: For the purposes of clauses (c) and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property,'" 5.8.4 The applicant has submitted that it proposes to incur expenditure on repairs and maintenance of the civil structure of building and its premises and the said expenditure shall be made from the earmarked Repairs/ Sinkin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mments in this respect can be made. 06 In view of the above discussions, we pass the following order ORDER (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) For reasons as discussed in the body of the order, the questions are answered thus - Question 1:- Whether the applicant is liable to pay GST on the contribution received from its members? Answer: - Answered in the affirmative. Question 2:- If yes, whether the applicant can avail the benefit of exemption under entry no. 77 of Notification no.12/2017-CTR dated 28th June, 2017 for the value upto ₹ 7, 500/- per month per member and in case the said monthly contribution exceeds ₹ 7,500/- per month, then the GST is leviable only on differential value in excess of ₹ 7,500/-? Answer: - In view of the discussions made above, in case the said monthly contribution exceeds ₹ 7,500/- per month, then the GST is leviable on the entire value of the monthly contribution collected. Question 3:- Whether the applicant is liable to pay GST on amount collected from its members towards the following accounts as per the Bye laws: a. Sinking Fund ..... X X X X Extracts X X X X X X X X Extracts X X X X
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