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SGST Advance Ruling Authority

GST – Tamil Nadu AAR – Hosing Society/Resident Welfare Association, Taxability of corpus/sinking fund, Eligibility to input tax credit - Apart from collecting monthly maintenance charges from its members, the applicant-association also collects 'corpus fund' or 'sinking fund' for specific purposes like painting, repairing/replacing major equipment, etc. - Whether the collection of corpus/sinking fund/capital amounts from the residents for the purpose of painting and carrying out building maintenance work in the common area of the apartment would be subject to GST - HELD - The collection of corpus/sinking fund/capital amounts from the residents is a supply of service and would be leviable to GST. The corpus/sinking fund collected is an advance payment towards future supply of services to the members and hence falls within the definition of 'consideration' under the GST Act - The activities of the resident welfare association fall within the scope of 'supply' under Section 7 of the CGST Act, 2017 as it involves supply of services by an unincorporated body to its own members for a consideration - Further, the corpus/sinking fund collected is not a 'deposit' but an 'advance' towards future supply of services to the members. As the amount is utilized for providing specific services to the members at a later date, it is akin to the advance received for the service to be provided later, which was previously taxable under the service tax regime - The collection of corpus/sinking fund/capital amounts from the residents is a taxable supply under GST and the applicant is liable to pay GST on such collections - The applicant is entitled to claim input tax credit on the GST paid on capital goods, goods and input services used for the corpus/sinking fund activities, subject to the restrictions under Section 17(2) of the CGST Act, 2017 – Ordered accordingly - Whether the GST paid on the services used for the corpus/sinking fund activities can be set off against the GST payable on the amounts collected as corpus/sinking funds – HELD - Since the collection of corpus/sinking fund is a taxable supply, the applicant is entitled to claim input tax credit (ITC) on the GST paid on capital goods, goods and input services used for the corpus/sinking fund activities, subject to the restrictions under Section 17(2) of the CGST/TNGST Act, 2017 - The applicant is providing both taxable supply (corpus/sinking fund) and exempt supply (monthly maintenance charges below Rs.7,500 per member), and hence the ITC claim would be restricted to the extent of the taxable turnover as per Rule 42 of the CGST Rules - Whether the applicant is required to levy or collect GST on the monthly maintenance charges, provided that the monthly sum does not exceed Rs.7,500 per member – HELD - As per Notification No. 12/2017-CT(Rate) dated 28-06-2017, the supply of services by a resident welfare association to its own members by way of reimbursement of charges or share of contribution up to an amount of Rs.7,500 per month per member is exempt from GST. Therefore, as long as the monthly maintenance charges collected from each member does not exceed Rs.7,500, the applicant is not required to levy or collect GST on such charges. However, the applicant would be required to take GST registration and comply with the GST law if its aggregate turnover exceeds Rs.20 lakhs in a year.
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