Taxability of the Residents’ Welfare Association has always been a delicate issue due to the sheer number of stakeholders who get affected by it. While the government has always tried to protect the middle- and lower-class residents, it had shown no intention of completely exempting tax for the others. This resulted in an exemption entry of service provided by such association to its members for reimbursement of charges or share of contribution upto Rs. 5000 per month per member (later enhanced to Rs. 7500) for the sourcing of goods or services for common use of members in a residential complex. The entry was first coined in the mega exemption notification no. 25/2012-ST dated 20th June 2012 during the Service tax regime. The said entry continued its relevance under GST vide its insertion under Entry no. 77 of the exemption notification no. 12/2017-Central Tax (rate) dated 28th June 2017. Further, the limit of Rs. 5000 was enhanced to Rs. 7500 by Notification No. 2/2018-Central Tax (Rate), dated 25-1-2018, w.e.f. 25-1-2018.


CBIC Flyer and the temporary relief

In the early years of GST, The Goods and Services Tax Department issued a clarification in the case of Co-operative Housing Societies, wherein they categorically stated that GST would be applicable only on the amount in excess of Rs. 7,500/-. The flier covers all Co-operative Housing Societies, in essence, RWAs, Housing Societies or Societies in residential complexes. This meant that the exemption upto Rs. 7500 would have been applicable and only the balance exceeding this amount, GST would have been applicable.

Circular and the U-turn

While the Government had made given an indication of their intentions through the aforesaid flyer, the said interpretation received a sudden jolt when the CBIC came out with a circular no. 109/28/2019-GST dated 22nd July 2019. As per the said circular, the following clarification was provided:

Sl. No. Issue Clarification
5. How should the RWA calculate GST payable where the maintenance charges exceed Rs. 7500/-per month per member? Is the GST payable only on the amount exceeding Rs. 7500/- or on the entire amount of maintenance charges? The exemption from GST on maintenance charges charged by a RWA from residents is available only if such charges do not exceed Rs. 7500/- per month per member. In case the charges exceed Rs. 7500/- per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs. 9000/-per month per member, GST @ 18% shall be payable on the entire amount of Rs. 9000/- and not on (Rs.9000-Rs.7500) = Rs. 1500/-

The above clarification was a complete opposite interpretation to what was stated in the flier originally released. While the flier does not have a legal sanctity, the same had been relied upon in absence of clarity on multiple fronts in the absolute initial years of GST. This U-turn by the Government caused immense lack of faith given that multiple RWAs had already relied upon the flier for the first couple of years before the release of the circular. It also reminded the danger that one is exposed to upon reliance on the fliers and press releases.

Advance Ruling Authorities and their adverse stand

The GST Department’s adverse stand against the RWAs first came to light in the case of TVH Lumbini Square Owners Association [2019 (27) G.S.T.L. 610 (A.A.R. – GST)] through order No. 25/ARA/2019, dated 21-6-2019. In this case, the Authority for Advance Ruling of Chennai took a stand that that exemption is applicable only if charges for sourcing goods and services for common use of members of Housing Society are upto aforesaid limit. Further, if the prescribed maintenance charges are exceeding the limit as mentioned, exemption is not admissible, and the entire charges of services provided to members would be leviable to GST.

Thereafter upon release of the aforesaid, what followed were multiple adverse judgements by the Advance Ruling authorities in case of RWAs. These include the judgements by Authority for Advance Ruling in the cases of Prestige South Ridge Apartment Owners’ Association [2019 (30) G.S.T.L. 107 (A.A.R. – GST)], Vaishnavi Splendour Home Owners Welfare Association [2020 (32) G.S.T.L. 462 (A.A.R. – GST – Kar.)] etc. and Appellate Authority for Advance Ruling in the case of Vaishnavi Splendour Home Owners Welfare Association [2020 (34) G.S.T.L. 360 (App. A.A.R. – GST – Kar.)].

Though the judgements of Advance ruling authorities are applicable only upon the applicant, multiple associations commenced charging GST on the entire component of maintenance charges and not only the value above Rs. 7500 in order to avoid any disputes with the Department. Some of the others continued with their old stand of charging GST on the portion above Rs. 7500 only.

Order of the Madras High Court and the altered dynamics

In the case of Greenwood Owners Association v. Union of India [[2021] 128 182 (Madras)], the question of taxability on entire vs balance above Rs. 7500 reached the judicial members of the Hon’ble Madras High Court. The Hon’ble Court ruled in favour of the RWA stating that GST is applicable only on the portion of maintenance charges above Rs. 7500 per month per member on the following major grounds:

a. The term ‘upto’ hardly needs to be defined and connotes an upper limit. It is interchangeable with the term ’till’ and means that any amount till the ceiling of Rs. 7,500/- would exempt for the purposes of GST.

b. Comparison could be drawn from other exemption entries of the Service Tax and GST. For prescribing a condition of exemption upto a certain limit and full taxability if such limit is breached, the law used a distinct language. For example, the language deployed in the proviso to clause 56 in Notification 25 of 2012 where it is stated ‘the exemption shall apply only where the gross amount charged for such service does not exceed Rs. 5,000/- in a financial year’. This talks about a condition and if this condition is breached, exemption is not applicable at all.

c. The prescription of a slab connotes that income upto that slab would stand outside the purview of tax on exigible to a lower rate of tax and income above that slab would be treated differently. The intendment of the exemption Entry in question is simply to exempt contributions till a certain specified limit. The clarification by the GST Department even as early as in 2017 has taken the correct view.

d. In the case of Commissioner of Customs Import, Mumbai V. Dilip Kumar & Company (361 ELT 577), the Supreme Court held that in the case of ambiguity in interpretation of a tax exemption provision or Notification in regard to its applicability qua entitlement or rate of tax to be applied, the interpretation should be strict and the burden of proving applicability would fall on the assessee. The ratio of that decision would apply only in a case where the provisions granting exemptions are ambiguous, whereas, in the present case, the Entry, in my view, is clear and hence it is only a question of interpreting the same.


Whether the RWAs should rethink their strategy of charging GST only upon the balance payment of Rs. 7500 per month per month after this judgement is a huge question of debate in the industry as of now. There may not be a single correct answer to this question and the same may be dependent on the risk appetite of the registered RWA. However, the following pros and cons of charging GST only upon the balance above Rs. 7500 per month per member after the judgement of Madras High Court may be considered:


> The impact of taxes on the individual flat owner would reduce to a great extent (upto 7500*18%).

> If there are further judgements of any other High Court or Apex Court, the Madras High Court judgement would attain finality. The same may be quoted at all levels of the Department to get the benefit of reduced tax burden.


> Where part of the outward supply is taxable (above Rs. 7500) and part of it is exempt in nature (upto Rs. 7500), ITC would be eligible to the extent of the taxable supply as per Section 17(2) and (3) of the CGST Act 2017. Thereby, the common ITC for goods and services received would have to be reversed proportionate to the exempt portion as per Rule 42 and 43 of the CGST Rules 2017. To this extent, the cost of procurement of goods and services may increase in the hands of the association.

> If there are any other High Court judgement or the Supreme Court overturns the Madras High Court, there is a potential risk of payment of differential taxes and interest in future. Penalty may also be leviable at the first level by the Department authorities.

> The Department at the level of scrutiny and adjudication may not consider such judgement and pass orders in the favour of the Department relying upon their own interpretations. Thereafter, only at the higher appellate levels, such judgement may be relied upon. This may result in potential litigation cost in the hands of RWAs.


Undoubtedly, this judgement of Madras High Court has brought in a ray of hope for those RWAs who had been charging GST on the balance exceeding Rs. 7500. However for the others, this decision has also reopened a lot of questions regarding the value of taxable supply for RWAs especially for the ones who had made peace with it after relying upon the adverse circular and AARs. These categories of persons should not blindly rely upon the said judgement before considering all the pros and cons of the decision being taken by them. One should be ready for the future consequences depending on the stand taken by them. Thereby, RWAs have been forced to rethink their strategy and it is hoped that this article can be of some assistance to them.

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More Under Goods and Services Tax


  1. Ashwin Chandrakant Matalia says:

    Is industrial and commercial premises Co-Op Societies where members own small factory and office premises are covered in RWA? How the word ‘Housing’ to be interpreted? Is Commercial Premises such as service industrial estate Galas and Office Units covered in RWA?

  2. vswami says:

    To pinpoint most of the observations, so also the conclusion reached are no longer of any relevance. Hence are outdated!? To know why so, look or relook up the long chain of further developments and reactions, besides spate of fresh controversies in the aftermath of the 2020-21 Amendment of the GST Law ?!


  3. Kasi says:

    We have 1BHK, 2BHK and 3BHK in our apartment if 3BHK pays 7600/- per month as maintenance . Then should all apartment including 1BHK and 2BHK (<7500) come under GST since association should be registered under GST or only the 3BHK maintenance will carry GST ??
    If association claims input tax how will this be passed as benefit to 3BHK if only they pay gst ?? Thx

  4. vswami says:

    SPONtaneuos (:
    DEspite “11,709 Views” why is “0 comment”

    REmain totally disappointed/ extremely but SADLY puzzled ?!?

    CLUE (?)< Already available from among others the related pr. posts , aplenty, on FB and LInkedin ; more so, on this website itself ! Had anyone cared to , as openly, invited, and minded to go through – even a quick glance would have served the intended purpose as an eye-opener (or demystifying the surrounding myths for decades now)- explaining at length why the obtaining unwarranted /unjustified controversies would have been nipped in the bud / put at rest long long ago !!!

    May have more to share if so compelled to do so #

    OVER / BAck to <<<<<<<<>>>>>>>

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September 2023