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TMI Blog2023 (3) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... ated at 33 Monalisa, 3 Bomanji Petit Road, Near Parsee General Hospital, Maharashtra, Mumbai 400026, ("hereinafter referred to as "Appellant") against the Advance Ruling No. GST-ARA-30/2020-21/B-71 dated 31.05.2022, pronounced by the Maharashtra Authority for Advance Ruling (hereinafter referred to as "MAAR"). BRIEF FACTS OF THE CASE 3.1 M/s Monalisa Co-operative Housing Society Ltd (the 'Appellant') is a co-operative housing society registered under the Maharashtra Co-operative Housing Society Act (MCHS Act) having 48 Flats which provides services to its members and charges GST on maintenance charges recovered from its Members. 3.2 Appellant has submitted that when there is a transfer of a flat, the outgoing member makes a gratuitous & voluntary payment to the society. The same does not have any implications on outgoing formalities to be completed as per MCHS Act. The Appellant stated that the above contribution made is entirely voluntary and is not at all a consideration received in lieu of services provided by the Appellant. 3.3 The Appellant is also collecting funds from its members for future major repairs and renovation of the premises. Such funds have no immediate utiliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble at all as it is for the members only? And if taxable, whether the same is taxable at the time of its collection or whether the same would be taxable on utilization of such funds? However, Question No. 1 raised in the application was withdrawn by the appellant during the course of the Preliminary Hearing and Question No. 3 raised in the application was withdrawn by the appellant during the course of the Final Hearing and therefore, both the questions were not taken up for discussion by the MAAR. 3.7 The MAAR, vide Order No. GST-ARA-30/2020-21/B-71 dated 31.05.2022, held in respect of the Question No. 2 asked by the Appellant, as under: 3.7.1 MAAR discussed that whether the appellant society can legally collect the so called gratuitous and voluntary donation from a transferor of a flat in the society. MAAR therefore referred to the 'Model Bye Laws of the Co-operative Housing Societies' in Maharashtra. Bye Law No 38 is very relevant in the present case and is therefore reproduced as under: Bye Laws No. 38 Notice of transfer of Shares and interest in the capital /property of the Society. (a) A member, desiring to transfer his shares and interest in the capital/property of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the government, any financing agency or any other authority; (xi) The undertaking/declaration in compliance with the provisions of any law for the time being in force, in such form as is prescribed under these bye-laws. Note : The condition of Sr. No. (ix) above shall not apply to transfer of shares and interest of the transferor in the capital/property of the society to the member of his family or to his nominee or his heir/legal representative after his death and in case of mutual exchange off lats amongst the members. 3.7.2 In view of the above clause (ix), MAAR observed that, No additional amount towards donation or contribution to any other funds or under any other pretext shall be recovered from transferor or transferee by the housing society. 3.7.3 Further Model Bye law No. 7 of the Cooperative Housing Societies, pertaining to 'raising of Funds' by a housing society, states the various ways how funds can be raised by a Housing Society and clause (e) specifically states that funds can be raised by voluntary donations but not from Transferor or Transferee. 3.7.4 Thus, in view of the Model Bye Laws No. 7 (e) & 38 (e) (ix) of the Cooperative Housing Societies, MAAR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y donations'. 3.7.7 Further, MAAR observed that in the instant case, the contributions are received from the outgoing members who have been members of the society in the past and, have received services from the society as envisaged under the GST Act. Thus, it can be said that, Payment from an outgoing member to a society is a payment made for the services rendered by society to the outgoing member during his stay as a member in society. As outgoing member is satisfied with the quality of services received by him and provided by society during his stay as a member in society. Hence, it is a consideration received to the society against satisfaction of the said member on supply of services received from the society. This is akin to the service charges levied by restaurants on which GST is collected. The restaurant collects GST on sale of food and many a times collect a percentage of the Bill amount as service charges (on which GST is levied) which are paid by customers. These service charges can be refused to be paid by the customer in the event that the customer is not happy with the services rendered by the restaurant. Similarly, in the subject case the outgoing member being happ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 which appears to be an inadvertent error). Thus the Hon. Treasurer found it fit to make an Affidavit on 09.11.2021 i.e. more than one year after the subject application was filed and that too, after the date of the Preliminary hearing i.e 27.07.2021 during which: the Appellant was directed to produce details of income collected as mentioned in Q-2 together with vouchers and details as to what treatment to said income is given in the final accounts and in the income tax returns; the appellant was asked also to produce declaration or proof taken from such members to prove the fact that said contribution is voluntary and not binding on outgoing member; the appellant was further asked to produce details as to NOC or No dues certificate issued (or not issued) to such members who have made contribution. The Affidavit of the Treasurer of the Appellant Society was prepared and made only after these above observations were made by MAAR during the Preliminary Hearing, and therefore preparation of the concerned Affidavit appears to be an afterthought on part of the Appellant society. 3.7.10 MAAR observed that the Appellant Society cannot take Voluntary Contributions at all from an outgoing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Model Bye Laws. MAAR was of the opinion that the amounts are collected for smooth transfer of the flat from the Transferor to the Transferee. 3.7.13 MAAR further reiterated the observation made by Hon'ble Bombay High Court in the case of Alankar Sahkari Griha Rachana Sanstha Maryadit vs Atul Mahadev and another, mentioned above that, in a situation where a flat purchaser wants a smooth transaction and transfer of the share certificate in his name, the society enjoys a dominant position and under such circumstances, the society may demand payment of amounts from the flat purchaser, under the garb of 'voluntary donations'. 3.7.14 Finally, MAAR found that the contribution made by the outgoing member is nothing but consideration as per the definition of term "consideration" provided u/s 2 (31) of the CGST Act, 2017. 3.7.15 From the definition of 'consideration', it is clear that "consideration" includes - any payment made (in the subject case payment is made by the Transferor which is termed as voluntary contribution by the Appellant) in money and since the payment is made towards Major Repair Funds of the Society, it is clear that the said payment is for the inducement of, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing such voluntary contribution. Therefore, the contribution provided by any outgoing member cannot be said to be in lieu of the said resolutions. iv. Also it is well known under the Contract Act that "parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law." On receipt of such voluntary contributions, there is no promise by the society of performing any Service of any kind to the outgoing member. v. The entire argument that the contribution is received for any past service performed or in lieu of building betterment fund is devoid of logic. There is no proof to tie the consideration received to service provided by the Society to the outgoing member. Further, if that were to be the case, if a member who remains in the society perpetually would never make a payment of an amount demanded by the society as he is not transferring his flat and the society would not get the funds intended. Therefore, there is no service performed by the Society at all. vi. The Contribution does not pass the test given u/s 2(31) of the CGST Act which states that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the person paying the monies and the beneficiary of the service. An outgoing member has paid the amount and when major repairs are carried out-the benefit will be to the existing members. Therefore, there is no benefit got to the member making the payment for which a supply is received by him. For this to be taxable as received as advance for services is true if the member giving is going to be getting the benefit and paying in advance. vi. We further want to quote the CESTAT Judgement of Karnataka Co-operative Milk Producers Federation Ltd. vs Commissioner of Central Excise [2022] 138 taxmann.com 486 (Bangalore - CESTAT) which states that "in case of an absence of a service provider and a service recipient relationship there cannot be any levy of service tax". Here the outgoing member is not a recipient of any service and neither the CHS is a Service Provider. 3. The Statement that Voluntary Contributions as a procedure is asked from all outgoing members is incorrect i. The ARA has not provided any reasonable explanation that the voluntary contributions provided by outgoing members is in fact not voluntary but in lieu of NOC provided as per By Laws. ii. We have alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in each case a contribution is sought by the society is unfounded and devoid of merit and complete contrary to the factual position so far as our society is concerned. vi. The above statements by the ARA authorities are followed by reference to Bombay HC Judgement of Alankari Sahakari Griha Sanstha Maryadit vs Atul Mahadev. The said case pertains to intention of the society for transfer of flats and position of the society in asking for voluntary pertains. We submit that the same has no relevance under GST since the issue in question is of applicability of GST to Voluntary Contributions and no where relates to the reference made in the Judgement. vii. The statement that voluntary contribution is akin to service charges paid in a restaurant mentioned by the authorities in Para 5.9 of the ARA Order is devoid of any logic. Service Charges in a restaurant are paid as a percentage of the total bill and are part of the invoice that is raised by the restaurant itself along with the food and beverage bill. Therefore, in case of a restaurant-the first act is done by the restaurant to add a service charge which is then presented to the customer. The other way of rewarding the restauran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us payment from an outgoing member for the time he has resided in the society cannot be taxable under the said CGST Act,2017 as there is no corresponding service being provided separately by the taxpayer society, is not tenable. As outgoing member has received the services provided by the society during his stay as a member in society, as he has satisfied with the services received by him, he has a gratitude towards society and accordingly he makes voluntary payment to the society. Hence, it is consideration received to the society against supply of services. Hence, taxable under the CGST Act-2017. Further, the Jurisdictional Officer vide his letter 28.2.2023 have also made the following submissions: Payment (Contribution) made by the outgoing member to a society is a consideration. Definition of consideration under Section 2(31) of CGST Act-2017 is reproduced below- "consideration"; in relation to the supply of goods or services or both includes- (a) any payment made or to be made, 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 includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly for the welfare of the society and society is free to use the fund in any manner as they require. Appellant further contended that the contribution does not pass the test given u/s 2(31) of the CGST Act which states that any consideration received should be in inducement of supply of services or goods. Since there is no supply of services or goods by the society, the entire contribution should not be subject to GST. 10. On perusal of the aforesaid contention of the Appellant vis-à-vis the impugned advance ruling of the MAAR, the moot issue before us is whether payment received from the outgoing member in the name of voluntary contribution is a consideration in response to or for the inducement of the supply of goods or services or both. 11. To decide the aforesaid issue, we would like to first look after the nature of the activity carried out by the appellant and exact nature of transaction where outgoing member has paid an amount to the appellant which appellant claims to be voluntary contribution. It is observed that the appellant is a co-operative housing society registered under the Maharashtra Co-operative Housing Society Act (MCHS Act) which provides services to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ror or Transferee in excess of premium i.e. Rs. 25,000/- fixed by the society for transfer of flats. We concur with the views of MAAR that the society cannot at all accept voluntary donations from a Transferor or Transferee in transgression of the Model Bye Laws of Cooperative Housing Societies in Maharashtra. 14. We concur with the observations of MAAR that the appellant is trying to give a colour of 'voluntary and gratuitous' payment for amount received from a Transferor/Outgoing member which is collected and will be used for carrying out Major Repairs in future as is evident from the Affidavits submitted by the outgoing member Mr Sanjay Sahjwani and Shri Chandresh Thakker, Treasurer of the Appellant Society. Accounting entries in the books of accounts also supports the view taken by MAAR. 15. Therefore, we concur with the observations of MAAR that the said contribution by the outgoingmember is nothing but Advance amounts paid to the society for services carried out or to be carried out for the members of the Society and is therefore taxable as per the GST Laws. 16. In view of the above discussions and findings, we pass the following order: Order 17. We confirm and uphold th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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