The Authority of Advance Ruling ( AAR ) in Karnataka has ruled that, the activity of procuring Goods and Services from third parties for upkeep and maintenance of apartments and collecting the monies from its members to pay third parties is an activity liable to GST.
The applicant, being an Apartment owners’ Association, have been engaged in providing maintenance and repairs of the common area of the apartments & surrounding areas viz. corridors, pathways, gardens, clubhouse, swimming pool, lifts, etc., providing lighting in common area, undertaking periodic up-keep of equipment etc., in the play area, etc.
The applicant has 264 members who are apartment owners. They collect contributions from its members calculated on the basis of the super built-up area owned by the members. In addition, it separately collects contribution towards corpus fund for future contingencies. The applicant procures goods and services from third party vendors for maintenance of the apartments and charges the maintenance charges on its members. It is a non-profit organisation.
The AAR was considering the following five Questions:
1) Whether the activity of procuring Goods and Services from third parties for upkeep and maintenance of Apartments and collecting the monies from its members to pay third party vendors is an activity liable to GST?
2) If liable to GST, whether the exemption entry no 77 of notification 12/2017 Central Tax (Rate) dated 28.06.2017 apply for maintenance charges collected from members?
3) If the exemption is available, whether it is available on per member basis or per flat basis, as some members could have more than one flat?
4) Whether the exemption as per entry no 77 of Notification 12/2017 Central Tax (Rate) is a standard exemption that can be claimed irrespective of the amount collected towards maintenance? i.e. if maintenance charges from a member for a month is Rs 10,000/ -, whether Rs 10,000/ – liable to GST or Rs 2,500/ – (Rs 10,000 — 7,500) liable to GST?
5) Whether the electricity charges paid to BESCOM (Electricity supply authority) for the power consumed towards common facilities and separately recovered from members, liable to GST?
Regarding the first question is with regard to liability of GST on maintenance charges, the AAR observed that, “the applicant association is supplying the services of maintenance of the common areas including repairs and upkeep and since the common areas belong all apartment owners, the maintenance charges are charged on the basis of the ratio of area of each apartment to the total area of all apartments and hence the applicant is providing a service of maintenance of apartments, buildings and property to all members and this is in the course of business. Hence this would amount to a taxable supply of services”.
While dealing the second question with regard to the applicability of exemption under entry number 77 of Notification No.12/2017, the Authority said that, “The exemption of Rs.7,500/ – in terms of entry no. 77 of Notification No.12/2017 – Central Tax (Rate) dated 28.06.2017, as amended, is applicable for maintenance charges collected from members. The benefit of exemption up to Rs 7500/ – is applicable on per flat basis, when members have more than one flat. The exemption dated 28.06.2017, as amended, on maintenance charges charged by a Resident Welfare Association (RWA) from resident is available only if such charges do not exceed Rs. 7,500/ – per month per member. In case the charges exceed Rs.7,500/- per month per member, the entire amount is taxable”.
The AAR also said that, “The electricity charges paid to BESCOM for power consumed towards common facilities and separately recovered from members are liable to GST as consideration received for the supply of maintenance services to the members”.
“The Corpus Fund or Sinking Fund collected from members is not to GST, as it amounts to deposits received towards future supply of services to members”, the AAR also added.
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