2024-VIL-17-AAAR
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SGST AAAR

GST – Section 2(31) of the GST Act - West Bengal AAAR – Meaning of term ‘advance deposit’ - Applicability of GST on contributions towards the corpus fund made by the members of the Residents’ Welfare Association (RWA) – appeal against Ruling passed by lower Authority holding that the amount collected by the appellant from its members for setting up a sinking fund is an advance payment towards future supply of services and liable to GST in terms of sub-section (2) of section 13 of the GST Act – HELD - the most essential criterion of a deposit is that it is temporarily kept in custody of another person which is refunded/returned to the depositor after a certain period of time. But in this case, such money is not refunded to the contributors - the contributions towards the sinking/corpus fund are made by the members of the RWA with a presumption that such funds will be used for bearing the burden of expenses of future supply of services like common area maintenance and other future contingencies as may arise. This contribution is thus an acceptance of the offer of guarding future burden of expenses as made by the RWA, i.e. the appellant in this case to its members. This money is never refunded back to the members but is always in the possession of the RWA for bearing such expenses - contributions towards sinking/corpus fund is not of the nature of a deposit in the truest sense of the term but an advance payment made by the members of the RWA for receiving a supply of common area maintenance services to be provided to them by the RWA in future. As a result, the same would be taxable and the appellant will be liable to pay tax at the time of receipt of such amount in accordance with the provisions of sub-section (2) to section 13 of the GST Act - The AAR Ruling is confirmed and the appeal stands rejected - Applicability of tax on electricity charges received on actual basis by the RWA – HELD - the appellant has collected the electricity charges consumed for common area from its members on pro-rata basis. Further, the tax invoice issued in this case for “Common Area Maintenance” shows a consolidated amount under SAC 999598 where a fixed rate is levied per square feet of the area of the flat. Tax @ 18% has also been charged on the entire amount. This Common Area Maintenance Charge not only includes common area electricity charges but also charges for other services like security, scavenging, water supply, maintenance of garden etc. Any amount collected on account of consumption of electricity has not been shown separately in the said invoice. Thus, services relating to electricity charges are bundled with supply of goods and services for the common use of its members and hence form a part of composite supply where the principal supply is the supply of common area maintenance services. Therefore, the rate of the principal supply i.e., GST rate on maintenance of the premise would be applicable.
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