The Advance Rulings Bench recently found that GST is liable for maintenance charges imposed on its members by a cooperative housing society if it exceeds rs 7,500 per month.
The AAR considered a retrospectively amended Finance Act of 2021 dating from 1 July 2017 in which the CHS and its members were defined as ‘different entities.’ This is the first decision after the modification. Therefore, as a ‘consideration’ received for the provision of goods or services owned by AAR, the CHS must receive and pay GST on the amount collected against service fees from its members.
A government circular states that if the maintenance fee exceeds Rs 7.500 per month per member, the CHS must levy and collect GST at a level of 18 percent. However, it must be emphasized that less than Rs 20 lakh or less per annum CHS do not have to register and hence have to fulfill GST duties. The latter is not necessary.
In this case, Emerald CHS located in Andheri has failed the argument that the provision of CHS services cannot be made
to its members because it is not distinct from its member’s entities.
To elaborate, the CHS was viewed as an agent of its Members and held that no accounting, cleaning, rehabilitating, provision of water, electricity in shared areas, or supplementary services such as accounting and auditing was taken of its services to its members. Members simply paid the costs and could therefore not levy GST. The AAR shot down this argument.
The applicants are not persons and the amounts received, against maintenance costs, by their members are nothing other than consideration for a supplier of goods or services as a separate entity. It stated that “in view of the amended Section7 of the Central GST Act of 2017, the applicant and their members are separate persons.”
The CHS has also stated that no notification was provided after the modification made by the Finance Act.
Nevertheless, the AAR pointed out that on 28 March 2021 the modification got President’s consent and that the controversial question of mutual principles had been settled on co-operative societies.
This decision has another side. Emerald CHS collected its members in two parts monthly bills. One of these was property tax not levied on GST, while the other was maintenance taxes levied on GST.
The AAR held that the applicant is liable to GST on maintenance charges ‘by whatever name called’ collected from its members if the monthly contribution from members is more than Rs 7,500 per month.
Summary
The Advance Rulings Bench recently found that GST is liable for maintenance charges imposed on its members by a cooperative housing society if it exceeds Rs 7,500 per month. The AAR considered a retrospectively amended Finance Act of 2021 dating from 1 July 2017 in which the CHS and its members were defined as ‘different entities’ This is the first decision after the modification.
