In re Capital Commercial Co-op. (Service) Society Limited (GST AAR Gujarat)
In the instant case, we find that the applicant is a registered entity as an Association of Persons and has a legal existence separate from its members. The applicant is collecting the amounts towards “Common Maintenance Fund (Deposit)” @ Rs.250/- per square foot of built-up area for future supply of services viz. maintenance, repair etc. of the common amenities, facilities, services, conveniences, utilities and common infrastructure of the Scheme meant for its members. It is a fact that the Common Maintenance Fund (Deposit) is mandatory under the Bye-laws of the Co-operative Societies/Resident Welfare Associations and is in the nature of a non-returnable deposit towards unforeseen events or planned events. Such deposit is never to be returned to the members, but same along with its interest will be used as and when required in future for maintenance, repair etc. of the common amenities, facilities, services, conveniences, utilities and common infrastructure of the Scheme meant for its members. Thus, the applicant, in addition to maintenance charges, also collected amount as Common Maintenance Fund (Deposit) from their members which is non-returnable. Since, the said amount is collected as non-returnable common maintenance fund, such deposits can be considered for such supply of service as mentioned above and, hence, will be liable to tax.
The applicant has contended that said common maintenance fund received by the applicant is a deposit only which is also refunded to members when they cease to be member of this society in future. And so, it gets covered within the proviso given in the definition of “consideration” u/s. 2(31) of the Act. Hence, it is not consideration for applicant and thus this transaction does not qualify as “supply” as per GST law. And so, the Applicant is not liable to make GST on this transaction. In this regard, it is worthwhile to mention that the applicant themselves stated in the application that sometimes, maintenance deposit standing the name of the person who is leaving this society shall get transferred to new person who is coming in as new member of this society in his place. Thus, in this case, said deposit is also not refunded but transferred the same into account of new member by making accounting entry. We, thus, find that said deposit cannot be considered as non-refundable and, hence, will be taxable under GST.
After deciding the taxability of the common maintenance fund/deposit, now we have to decide the time of supply for such transaction. The proviso to the clause (31) of the Section 2 of the CGST Act, 2017, as discussed in foregoing paras, states that the deposit given in respect of a future supply shall not be considered as payment made for such supply until the supplier applies such deposit as consideration. In the instant case, the common maintenance fund/deposit so collected is the amount collected towards the future supply of service of maintenance, repair etc. and accordingly, gets applied as consideration towards supply of services only at the time of actual supply of services. Therefore, the amount collected towards the common maintenance fund/deposit do not form part of consideration towards supply of services at the time of collection, however, the amounts so utilized for provision of service are liable to GST at the time of actual supply of service.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING,GUJARAT
BRIEF FACTS
M/s. The Capital Commercial Co-op. (Service) Society Limited, 717/1, Near Krishna Kunj, Sola, Ahmedabad-380060, Gujarat (herein after referred to as the “applicant” or the “Society” for the sake of brevity), is a registered Commercial Co- Operative service society providing services of maintenance of common facilities/amenities to their members. The applicant has collected money from their members under following heads:
1. Monthly maintenance fees (Recurring basis).
2. Common Maintenance Fund/Deposit (one-time basis).
STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) RAISED:
2. The Developer M/s. Sahjanand Buildtech LLP has promoted a scheme of commercial complex- commercial project thereon, known or described as “The Capital” (Project / Complex / Scheme), consisting of commercial premises, being shops, offices and showrooms.
3. For the purpose of convenience and efficient management, running and maintenance of the project, and to hold the land and Project, and for the common object and purposes of the purchasers of the premises in the project, and to meet the requirement of law, said Service Society under the Gujarat Cooperative Societies Act 1961 has been formed and it consist of purchasers of the premises in the Project as its Members and Shareholders and the Purchaser agrees to become member of the Society.
4. It was decided by way of executing respective sale deed between the developer, M/s. Sahjanand Buildtech LLP and all the individual purchasers of premises in the scheme that:
a. “The Purchaser shall pay by way of Common Maintenance Fees the amount at the rate of Rs.6.50 per square foot per month of Built-up Area for initial period of 24 months from the date/ obtaining of Building Use Permission and thereafter as may be fixed by the Owner – Developer. This Maintenance amount will be utilised to meet with/pay for the common electricity bills, water bills, staff salaries, repair, replacement, addition, modifications, renovation, administration, management, etc. of common amenities, facilities, services and infrastructure of the Project. The Maintenance amounts for other unit in the Project will be payable similarly. If the Maintenance amounts are found to be insufficient, the Purchaser may be required to pay an additional amount as may be sufficient, in the opinion of Developer/Society, to make good the deficit in such expenses. The decision of the Developer/Society in all matters herein shall be final and binding upon the Purchaser.
b. In addition to aforesaid, Common Maintenance Fund [Deposit] at the rate of Rs.250/- per square foot of Built-up Area shall be paid by the Purchaser. Similar Common Maintenance Fund will be generated from the other prospective purchasers of the units in the scheme, and the income thereof [i.e. income generated from the a.ccumulated fund in form of interest on fixed deposit etc.] will be utilized to meet the expenses of maintenance, repair, etc. of the common amenities, facilities, services, conveniences, utilities and common infrastructure of the scheme.
c. The Project will finally be handed over to the Society upon the same is fully and finally executed, all premises thereof have been sold and disposed of and all the amounts and revenues to be recovered from Project by Developer and agencies claiming under it are fully and finally recovered”
5. Accordingly, based on such respective sale deeds executed between the developer and all the individual purchasers of the units under this commercial complex scheme, the applicant service society has received advance maintenance fees of Rs.6.50 per square foot per month and also Rs.250/- per square foot of built -up area from each purchasers of units in this commercial complex scheme who have eventually become member of this service society now.
6. The Applicant has filed their return of income also by showing the Monthly maintenance fees collected by them as their direct income under profit and loss account and paid income tax on the net profit portion. Whereas the one time common Maintenance fund collected from members has been shown as “Maintenance Deposits” under their current liability head of Balance Sheet. And, thus, it is not forming part of their income as per income tax return filed by applicant.
7. The applicant understands that advance received for initial 24 months for maintenance fees is against the future supply of maintenance services by it to their members which is covered under section 7 of CGST Act and thus has paid the GST on the same.
8. For understanding the applicability of GST on the Rs.250/- per square foot of built -up area received from each member as “Common Maintenance Fund / Deposit” this advance ruling has been sought.
9. They have also submitted the Sample Copy of Sale Deed executed by the developer with all the individual purchasers of units in this commercial complex scheme and the Copy of Audited Financials along with income tax return and computation of income for Financial Year 2018-19 for the applicant.
10. In view of the above backdrops, the applicant has sought for advance ruling in respect of following questions:
Question 1: Whether applicant is liable to pay GST on the common maintenance fund/ deposit collected from their members?
Question 2: If Yes, then, what shall be considered as the time of supply for such transaction?
Statement containing the applicant’s interpretation of law and/or facts, as the case may be, in respect of the aforesaid question(s) (i.e. applicant’s view point and submissions on issues on which the advance ruling is sought).
Applicant’s submission for Question No:1:
11. The taxable event in GST is supply of goods or services or both. Term Supply has been defined under section 7(1) of the CGST Act, 2017 as under:
Section 7 (1):
“For the purposes of this Act, the expression “supply ” includes-
(a.) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
Thus, besides other parameters, for any transaction to get considered as supply, there has to be consideration involved in the same.
11.1 The Term consideration has been defined in the section 2(31) of the CGST Act, 2017, as under:
2(31) “consideration” in relation to the supply of goods or services or both includes-
(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;
Thus, Prima facie a conclusion can be drawn without much difficulty that a deposit given in respect of the supply shall not be considered as payment made for such supply unless the supplier appropriates such deposit as consideration for the said supply.
12. In the present matter, applicant has received “Common Maintenance Fund” from each member as one-time event and booked the same as “Maintenance Deposit” under current liability in their audited books of accounts. Further, it is not also forming part of his income as per return of income filed with the Income Tax department.
