Applicability of GST on Repair & Maintenance and Sinking Fund

In M/s. Forest County Co-operative Housing Society Ltd. [GST-ARA, Application No. 65 dated November 26, 2019], M/s. Forest County Co-operative Housing Society Ltd. (Applicant) has sought an advance ruling on the issue of applicability of GST on Repair and Maintenance Fund and Sinking Fund and whether the exemption limit of Rs. 7500/- per member lies on these Funds in reference to Sr. No. 77 of Notification No. 12/2017 -Central Tax (Rate) dated June 28, 2017 (“Services Exemption Notification”).

The Hon’ble Maharashtra Authority for Advance Ruling (“MAAR”) held that GST is applicable on Repair and Maintenance Fund as well as Sinking Fund because the same is covered under “service” in the GST Act and are liable to be taxed subject to threshold turnover limit and Services Exemption Notification.

It further relied upon Sr. No. 5 of Circular No. 109/28/2019-GST dated July 22, 2019 (F No 332/04/2017-TRU Govt. of India Ministry of Finance, Department of Revenue (Tax Research Unit) (“Circular No. 109/28/2019”) to hold that if the gross amounts collected by the applicant in their bills or invoices exceed Rs. 7500/- then exemption limit of Rs. 7500 is not applicable on two components of maintenance bills.

Our Comments

Overturning the Circular No. 109/28/2019, the Hon’ble Madras High Court in Greenwood Owners Association v. Union of India W.P. NOS. 5518 & 1555 OF 2020 and 27100 & 30004 OF 2019 held that the conclusion of MAAR and Circular No. 109/28/2019 to that effect disentitling Resident Welfare Associations (“RWA”) to the exemptions was contrary to the express language of Sr. No. 77 of Services Exemption Notification.

Clarifying the same, it was held that it is only the contributions to RWA in excess of Rs. 7,500/- that would be taxable under the GST Act.

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