Whether GST is applicable on Repair & Maintenance Fund & Sinking Fund: GST AAR Maharashtra
Fact and Issue of the case
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. FOREST COUNTY CO-OPERATIVE HOUSING SOCIETY LIMITED, the applicant, seeking an advance ruling in respect of the following questions
1. Applicability of GST an Repair and maintenance fund and sinking fund
2. Whether or not exemption Limit of Rs.7500/- per member is applicable on above two components of maintenance bill by the housing co-operative Society to members of society.
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression `GST Act’ would mean CGST Act and MGST Act.
Observation of the AAR
The Authority has gone through the facts of the case, documents on record and submissions made by both the applicant as well as the jurisdictional officer.
M/s forest County Housing Co-operative society, the applicant, is an unincorporated body and a non-profit entity registered under THE MAHARASHTRA CO-OPERATIVE SOCITIES ACT, 1960 has submitted that it is registered under GST since its aggregate turnover is more than 20 lakhs. It collects Maintenance charges from its members on a quarterly basis for providing services and goods for the common use of its members and issues Monthly bill (including Repair and Maintenance fund and Sinking Fund) which is less than Rs. 7500/- per month per member.
The Applicant is of the view that having obtained registration does not mean that the housing society has to compulsorily charge GST in the monthly maintenance bills raised on its members and have cited the provisions of notification No. 2/2018- Central Tax (Rate), dated 25.01.2018, which, at Sr. No.77 provides for the following exemption to housing societies, “a society may be registered under GST, however if the monthly contribution received from members is less than Rs. 7500/- (and the amount is for the purpose of sourcing of goods and services from a third person for the common use of its members), no GST is to be charged by the housing society on the monthly bill raised by the society. However, GST would he applicable if the monthly contribution exceeds Rs. 7, 500/-.”
As per the submission of the Applicant, their Gross Turnover is more than 20 lakhs and the Maintenance Charges per month per member is within Rs. 7,500/- and hence it is not required to collect any GST from its members.
We find from the written submissions made that, the applicant has not challenged any provision of the notification nor raised any question of laws, in the application filed. The applicant has asked certain queries. The issues are very specific i.e. applicability of GST on Repair and maintenance fund and sinking fund and the query regarding exemption limit of Rs. 7500/- per member.
As per the provisions of section 7 of CGST ACT, 2017, the Applicant ‘co-operative housing Society’ and its members are to be considered as separate persons. It means, both are distinct entities. It is to be decided whether GST is applicable on the value of charges for the aforesaid events of supply charged by applicant in monthly bills raised on its members. We find that, licant is engaged in “supply of services” to its members and collects the consideration hese supplies. The supply of services are as per the bye laws of the ‘THE SHTRA CO-OPERATIVE SOCIETIES ACT, 1960’.
As per the provisions of GST laws, ‘Repair and maintenance fund and sinking fund” are A under the “services” as per the provisions of the GST Act. Hence, such services ided by the applicant to its members is liable to tax subject to crossing the threshold turnover limit and as per the provisions of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.
circular no. 109/28/2019-GST dated 22/07/2019 (F No 332/04/2017-TRU Govt Of India, Ministry of Finance, Department of Revenue (Tax research Unit) is reproduced as under:-
|Are the maintenance charges paid by|
residents to the Resident Welfare Association
(RWA) in a housing Society exempt from
GST and if yes, is there an upper limit on the amount of such charges for the exemption to
|Supply of service by RWA (unincorporated body or a non-profit entity registered under any law) to its own members by way of reimbursement of charges or share of contribution up to an amount of Rs. 7500 per month per member for providing services and goods for the common use of its members in a housing society or a residential complex are exempt from GST. Prior to 25th January 2018, the exemption was available if the charges or share of contribution did not exceed Rs 5000/-per month per member. The limit was increased to Rs. 7500/-per month per member with effect from 25th January 2018: (Refer clause (c) of SL No. 77 to the notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 as amended vide notification No. 2/2018- Central Tax (Rate), dated 25.01.2018)|
|A RWA has aggregate turnover of Rs.20 lakh or less in a financial year. Is it required to take registration and pay GST on|
maintenance charges if the amount of such
charges is more than Rs. 7500/- per month per member?
|No, if aggregate turnover of an RWA does not exceed Rs.20 Lakh in a financial year, it shall not be required to take registration and pay GST even if the amount of maintenance charges exceeds Rs. 7500/- per month per member. RWA shall be required to pay GST on monthly subscription/ contribution charged from its members, only if such subscription is more than Rs. 7500/- per month per member and the annual aggregate turnover of RWA per by way of supplying of services and goods is also Rs. 20 lakhs or more.|
|Annual Turnover of RWA||Monthly|
|More than Rs. 20 Lakhs||More than Rs. 7500 /-||No|
|More than Rs. 20 Lakhs||Rs. 7500/- or less||Yes|
|Rs. 20 Lakhs or less||More than Rs. 7500 /-||Yes|
|Rs. 7500/- or less||Yes|
A plain reading of the above said circular makes it clear that, it is the intention of the Government, to tax Housing Societies under GST Laws subject to the condition that the reimbursement of charges or share of contribution of the members exceed an amount of Rs. 7500/- per month per member for Supply of service rendered by Resident Welfare Association (unincorporated body or a non- profit entity registered under any law) to its own members. In addition, it is also clarified that if the Gross turnover exceeds the 20 lakhs, but maintenance charges collected are up to or less than Rs.7500/-per member per month, then no is GST applicable. Further, it is clarified that even in cases in which Turnover of receipt is below 20 lakhs, but maintenance collected exceeds Rs. 7500/-per member per month, no GST is payable. It is seen that, the Government has clarified the eventualities of transactions and has removed the doubts of the taxpayers regarding the applicability of GST.
The applicant has submitted sample copies of bills/invoices issued against the services provided to its members which are available on record. The said bills/invoices are examined and it shows that applicant has collected charges separately for sinking fund, Repair and maintenance fund, maintenance charges, non-occupancy charges etc in the bills. One bill copy each, submitted for 2BHK, 3 BHK, 3 1/4 BHK and 4 1/2 BHK flats on sample basis are kept on record. On perusal of submitted bills, it is seen that the charges are fixed as per the flat are in square feet basis for sinking fund and repair and maintenance fund and further, an amount of Rs.2800/- is charged per flat per month basis for maintenance charges to its members and 10 % of maintenance charges as non-occupancy charges.
It is a fact that, the applicant has collected charges separately on above said heads in maintenance bills and invoices which were issued to its members. Considering the aforesaid notification and clarification circular issued by TRU, we hold that, if the applicant has collected the charges from its members on the above said supplies up to Rs. 7500/-per member per month basis, then the said supplies would not attract the GST and if the charges collected exceed the Rs. 7,500/- per month, in that case, the GST would be applicable on the total amount recovered (by whatever name called) from its members on their supply of services. This aspect is clarified in the said circular at Sr. No. 5 which is reproduced below:
|5||How should the RWA calculate GST payable where the|
maintenance charges exceed Rs. 7500/- per month per member? Is the GST payable only on the amount exceeding Rs. 7500/- or on the entire amount of
|The exemption from GST on maintenance charges charged by a RWA from residents is available only i f such charges do not exceed Rs. 7500/- per month per member. In case the charges exceed Rs. 7500/-per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs. 9000/- per month per member, GST @18% shall be payable on the entire amount of Rs. 9000/-and not on [Rs. 9000 – Rs. 7500] = Rs. 1500/- .|
The bills produced by the applicant on sample basis, are reproduced as below:
|Invoice No. and date||Period of Bill (Quarterly)||Current Invoice amount (Quarterly) as mentioned in top row of the bill / Monthly value arrived by dividing the total current invoice by the total no of months involved.||Type of Flat|
|1||20019.2020/1696, dt.24 July 2019||July to sept. 2019||18237=00 / 6079=00||2131-IK|
|2||20019.2020/1224 dt.24 July 2019||July to sept. 2019||21502=00 / 7167=00||3BHK|
|3||20019.2020/1182, dt.24 July 2019||July to sept. 2019||23558=00 / 7852=00 Here collection exceeds 7500||3 1/2 BHK|
|4||20019.2020/1786, dt.24 July 2019||July to sept. 2019||26288=00 / 8762=00 Here collection exceeds 7500||4 1/2 BHK|
On the perusal of the above said sample quarterly bills and its details, if the total value of charges exceed the limit of Rs. 7500/- per member per month , then the total value of the nt in said bill would be held as taxable to levy GST thereon and GST would be applicable So in case of the bills at serial number three and four (above) the GST is applicable.
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