In re Prinsep Association Of Apartment Owners (GST AAR West Bengal)
The order of the Authority for Advance Ruling (AAR) in the case of Prinsep Association of Apartment Owners in West Bengal addresses three key questions related to Goods and Services Tax (GST) implications on the maintenance charges and other collections by an Association of Persons (AOP) registered under the West Bengal Act XVI of 1972:
Question 1: Where monthly contribution charged to a member exceeds INR 7500 per month, whether the applicant can avail the benefit of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 (Sl. No. 77) read with Notification No. 02/2018 dated 25.01.2018, which provides for exempting from tax, the value of supply up to an amount of Rs. 7,500/- per month per member? In other words, whether tax would be charged over and above INR 7500 or the total amount collected from members.
Answer: The AAR ruled that the exemption is not available when the maintenance charges exceed Rs. 7,500/- per month per member. In such cases, where the charges exceed Rs. 7500/- per month per member, the entire amount is taxable.
Question 2: Whether the applicant is liable to pay CGST/SGST on amounts which it collects from its members for setting up a corpus fund for future contingencies/ major CAPEX. Whether such fund from members will come under the definition of supply and liable to be taxed?
Answer: The AAR ruled that the amount collected by the applicant from its members for setting up a sinking fund is considered an advance payment towards future supply of services, and therefore, the applicant is liable to pay tax on such supply.
Question 3: Whether the applicant is liable to pay CGST/SGST on collection of common area electricity charges paid by the members and the same is recovered on the actual electricity charges?
Answer: The AAR ruled that the amount collected on account of common area electricity charges, being a part of composite supply, is taxable in cases where the supply of common area maintenance services fails to qualify for exemption under serial number 77 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, as amended.
In summary, the ruling clarifies the GST implications on various charges collected by the Association of Apartment Owners, emphasizing that the exemption is subject to the condition that maintenance charges do not exceed Rs. 7,500/- per month per member. The ruling also addresses the taxability of amounts collected for corpus funds and common area electricity charges under specific circumstances.
Read AAAR Ruling: GST on Corpus Fund & Electricity Charges collected from members by RWA
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, WEST BANGAL
1.1 At the outset, we would like to make it clear that the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression “GST Act“ would mean the CGST Act and the WBGST Act both.
1.2 The applicant is stated to be an Association of Persons (AOP, for short) registered with Association of Apartment Owners under the West Bengal Act XVI of 1972, whose primary functions are:
(i) to raise funds;
(ii) to provide for maintenance, repair and replacement of the common areas and facilities of the property and payments thereof;
(iii) to provide for proper maintenance of accounts;
(iv) to provide for and do any other thing for the administration of the property in accordance with the Act and bye-laws.
1.3 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01:
(1) Where monthly contribution charged to a member exceeds INR 7500 per month, whether the applicant can avail the benefit of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 (Sl. No. 77) read with Notification No. 02/2018 dated 25.01.2018 which provide for exempting from tax, the value of supply up to an amount of Rs. 7,500/- per month per member? In other words, whether tax would be charged over and above INR 7500 or the total amount collected from members.
(2) Whether applicant is liable to pay CGST/SGST on amounts which it collects from its members for setting up a corpus fund for future contingencies/ major CAPEX. Whether such fund from members will come under the definition of supply and liable to be taxed?
(3) Whether the applicant is liable to pay CGST/SGST on collection of common area electricity charges paid by the members and the same is recovered on the actual electricity charges?
1.4 The aforesaid questions on which the advance ruling is sought for are found to be covered under clause (b) and (e) of sub-section (2) of section 97 of the GST Act. The applicant has enclosed copies of challans as proof of payment of Rs.5,000/- for SGST and Rs. 5,000/- for CGST towards fee for Advance Ruling.
1.5 The applicant states that the questions raised in the application have neither been decided by nor is pending before any authority under any provision of the GST Act.
1.6 The officer concerned from the revenue has also raised no objection to the admission of the application.
1.7 The application is, therefore, admitted.
Submission of the Applicant
The submission of the applicant along with his interpretation of law is reproduced herein under:
2.1 M/s PRINSEP ASSOCIATION OF APARTMENT OWNERS or the applicant is an AOP with 246 members having its principal place of business at 1, New Bata Road, Calcutta Riverside, P.S. Maheshtala, Kolkata 700140. The applicant has received Certificate of Registration from Association of Apartment Owners under the West Bengal Act XVI of 1972. It would be responsible for managing the day-to day activities, organizing events, managing facilities in the apartment as well as safeguarding the rights of the unit holders of the society. The applicant provides maintenance or repair of the common area of the apartments and surrounding which inter alia includes lighting in common area. To provide these services, the applicant collects monthly subscription as maintenance charges from its members. In addition to this, the applicant is stated to be engaged in setting up a Corpus Fund to meet future contingencies for which the applicant also collects subscription from its members. The instant application is related to taxability of such monthly subscription charges in terms of serial number 77 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.20177, as amended. The other issues are in respect of liability to pay tax on amount collected for common area electricity charges and corpus fund.
2.2 Statement containing applicant’s interpretation of law:
