The Maharashtra Appellate Authority of Advance Ruling (AAAR) has ruled that GST is payable on voluntary gratuitous payment from an outgoing member of a housing cooperative society.
M/S Monalisa Co-operative Housing Society Ltd (the ‘Appellant’) is a co-operative housing society registered under the Maharashtra Co-operative Housing Society Act (MCHS Act) having 48 Flats which provides services to its members and charges GST on maintenance charges recovered from its Members.
The Appellant has submitted that when there is a transfer of a flat, the outgoing member makes a gratuitous & voluntary payment to society. The same does not have any implications on outgoing formalities to be completed as per MCHS Act. The Appellant stated that the above contribution made is entirely voluntary and is not at all a consideration received instead of services provided by the Appellant.
The Appellant is also collecting funds from its members for future major repairs and renovation of the premises. Such funds have no immediate utilization purpose. The amount will only be utilized once the Appellant finalizes the bids received for the repairs to be carried out.
The appellant submitted that as per Sec 7 of the CGST Act, 2017, supply should be made during the furtherance of business. A gratuitous payment by an outgoing member cannot be regarded as a consideration but rather in substance as a gift to society as the member is paying of his own volition. The appellant further submitted that such payment cannot be treated as consideration as there is no business transacted and the person acts on his own volition in its entirety.
A gratuitous payment by an outgoing member cannot be regarded as a consideration but rather in substance as a gift to society as the member is paying of his own volition. The voluntary contribution is paid by the outgoing member of his own free will and only for the welfare of the society and society is free to use the fund in any manner as required.
The appellant further contended that the contribution does not pass the test given u/s 2(31) of the CGST Act which states that any consideration received should be in the inducement of supply of services or goods. Since there is no supply of services or goods by society, the entire contribution should not be subject to GST.
MAAR held that the appellant is trying to give a colour of ‘voluntary and gratuitous’ payment for the amount received from a Transferor/Outgoing member which is collected and will be used for carrying out Major Repairs in future as is evident from the Affidavits submitted by the outgoing member Mr Sanjay Sahjwani and Shri Chandresh Thakker, Treasurer of the Appellant Society.
MAAR has observed that considering the Model Bye-Laws No. 7 (e) & 38 (e) (ix) of the Cooperative Housing Societies, the appellant cannot recover an additional amount towards donation or contribution to any other funds or under any other pretext from transferor or transferee by the housing society. Society cannot collect amounts as voluntary donations from the Transferor or Transferee over the premium i.e. Rs. 25,000/- fixed by the society for the transfer of flats.
A Coram comprising of Dr D K Srinivas, MEMBER (Central Tax) Shri Rajeev Kumar Mital, MEMBER (State Tax) held that the contribution by the outgoing member is nothing but Advance amounts paid to the society for services carried out or to be carried out for the members of the Society and is therefore taxable as per the GST Laws.
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