Corpus or Sinking Fund Collected by Housing Society Is Taxable as Advance Under GST

In re Godrej United Owner’s Association (GST AAR Karnataka)

The Karnataka Authority for Advance Ruling (AAR) considered an application filed by a registered apartment owners’ association seeking clarification on various GST issues relating to maintenance charges, water supply, corpus or sinking fund collections, applicability of exemption under Notification No. 12/2017-Central Tax (Rate), and taxability of voluntary contributions. The association was formed to maintain common area facilities and provide amenities to its members and collects maintenance charges from members for common area services. These charges are invoiced quarterly based on the area of each apartment. The applicant also collects contributions for water supply and intends to collect corpus or sinking funds for future maintenance and repairs. Additionally, voluntary donations are collected from members for cultural events. The association sought rulings on the applicability of GST exemptions, classification of water supply, taxability of deposits collected as corpus funds, and whether such contributions should be included in the calculation of the exemption threshold of ₹7,500 per member per month.

On the first issue, the Authority examined Entry No. 77 of Notification No. 12/2017, which grants exemption for contributions collected from members of housing societies for sourcing goods or services for common use up to ₹7,500 per member per month. The Authority held that the exemption must be determined on a monthly basis per member and cannot be aggregated annually or determined based on the invoicing cycle such as quarterly billing. Therefore, the exemption applies month-wise regardless of the billing pattern adopted by the association.