The West Bengal Authority of Advance Ruling (AAR) has ruled that no Goods and Service Tax (GST) is applicable on reimbursement charges collected by Residential Welfare Association (RWA) from its members being less than Rs. 7500 per month.
The bench of Dr Tanisha Dutta (Joint Commissioner CGST & CX) and Joyjit Banik (Additional Commissioner, SGST) has observed that the benefit of exemption as allowed vide serial no 77 of the Notification 12/2017 Central Tax (Rate) dated 28.06.2017, as amended, is entirely member specific meaning thereby if a RWA collects up to an amount of Rs.7500/- per month from a member by way of reimbursement of charges or share of contribution, the RWA shall not be liable to pay tax on such amount irrespective of the fact that there may be other members (even from the same person if he owns another flat in the same housing society or residential complex) in respect of whom such quantum exceeds Rs.7500/- per month. To illustrate, if a RWA who is registered under the GST Act, collects Rs.7000/- per month as maintenance charges from one of its members and Rs.9000/- from another member in the same residential complex, the RWA shall not be liable to pay tax on Rs.7000/-.
The applicant is a Residential Welfare Association (RWA) or an Association of Persons (AOP) who is engaged in the business of providing services to its own members by way of reimbursement of charges or share of contribution for sourcing of goods or services procured from a third person.
Read More: https://jurishour.in/gst-not-applicable-on-penalties-late-fees-rbi-law/
Issue Raised Seeking Advance Ruling
- Whether Serial No 77 of the Notification No 12/2017 shall be applicable on such members of RWA (unincorporated body) whose share of contribution is less than Rs. 7,500 per month and whereas the monthly maintenance (share of contribution) of other members of the same RWA are more than Rs. 7,500/-?
- Whether RWA (unincorporated body) shall charge GST from all the members irrespective of their share of contribution (monthly maintenance) or only from those members whose share of contribution is more than Rs. 7,500 per month although the annual turnover of RWA is more than 20 lakh per annum?
- Whether RWA (unincorporated body) shall charge GST from those members whose maintenance is less than Rs. 7,500 per month in a case where other members of same RWA are contributing more than Rs. 7,500 per month, although the annual turnover of RWA is more than Rs. 20 lakhs per annum?
- From which members the RWA shall charge GST in a situation where the annual turnover is more than Rs. 20 lakhs, but the share of contribution from maximum members of RWA is less than Rs. 7,500 per month but some paying monthly maintenance (Contribution) of more than Rs. 7,500/-?
The applicant is stated to be a Resident Welfare Association (RWA) duly registered under the West Bengal Apartment Ownership Act, 1972 vide Regn No. 003032022 of 2022 and provides services to its own members by way of reimbursement of charges or share of contribution (maintenance) for sourcing of goods and services procured from a third person for the common use of the members in the residential complex.
The applicant states that there are 33 apartments in the residential complex and each flat owner is a member of the RWA. The applicant collects monthly maintenance charges from each member based on the super built area of the apartment that the member owns.
The applicant refers serial no 77 of the Notification 12/2017 CT(R) dated 28.06.2017, amended time to time, by virtue of which services by an unincorporated body (RWA) by way of reimbursement of charges or share of contribution up to an amount of Rs. 7,500 per month per member to its members in a housing society or a residential complex is exempted under GST Act.
The applicant interprets that their activities as a RWA of providing maintenance services to its own members attracts SAC 999598 which falls under heading “Services furnished by Home Owners Association”.
The applicant argues that notification does not specify anything about the chargeability of GST from those members of the same residential complex whose monthly maintenance is less than Rs. 7,500 per month and whereas other members of the same residential complex are contributing more than Rs. 7,500 per month.
As per general business sense, a person who owns two or more residential apartments in a housing society or a residential complex shall normally be a member of the RWA for each residential apartment owned by him separately. The ceiling of Rs. 7500/- per month per member shall be applied separately for each residential apartment owned by him.
For example, if a person owns two residential apartments in a residential complex and pays Rs. 15000/- per month as maintenance charges towards maintenance of each apartment to the RWA (Rs. 7500/- per month in respect of each residential apartment), the exemption from GST shall be available to each apartment.
The benefit of exemption as allowed vide serial no 77 of the Notification 12/2017 Central Tax (Rate) dated 28.06.2017, as amended, is entirely member specific meaning by if a RWA collects up to an amount of Rs.7500/- per month from a member by way of reimbursement of charges or share of contribution, the RWA shall not be liable to pay tax on such amount irrespective of the fact that there may be other members (even from the same person if he owns another flat in the same housing society or residential complex) in respect of whom such quantum exceeds Rs.7500/- per month.
To illustrate, if a RWA who is registered under the GST Act, collects Rs.7000/- per month as maintenance charges from one of its members and Rs.9000/- from another member in the same residential complex, the RWA shall not be liable to pay tax on Rs.7000/-.
The AAR concluded that the applicant shall not be liable to pay tax on the amount which is collected from its members by way of reimbursement of charges or share of contribution where such amount does not exceed Rs.7500/- per month per member.
Applicant Name: Fortune Estates Association of Apartment Owners
Date: 29/07/2024
