The Karnataka Authority of Advance Ruling (AAR) ruled that the maintenance activity laid out from the fund collected for providing facilities to the society attracts GST.
The applicant is a Housing Society registered under the Karnataka Co-operative Societies Act, engaged in the development and sale of Sites for its members. The applicant submitted that the process of formation of Sites involves identification of land, which may be an Agricultural land and this agricultural land has to be converted into non-agricultural land from the prescribed authority.
Further society has to secure plan approval from the appropriate Planning authority and execute the works like marking of the sites, formation of the roads, preparing and leveling of the roads, asphalting the roads, formation of drainage, securing water and electric connection to the layout as a whole and connecting the same to the individual residential sites.
Society has to develop Parks and other Civic Amenities in terms of the approved plan to make the sites developed, habitable zones, and to ensure completion of the execution of all the other works in terms of the approved Plan.
The applicant sought advance ruling on the issue that is the activity of maintaining the facilities at the layout from the funds collected from the members of the Society a service attracting GST.
Maintenance involves upkeep and maintenance of amenities and due to the length of the period roads, drainages and other UGD facilities need to be redone/re-constructed.
If the answer to question is yes then, does the Society’s collection of sum towards maintenance charges calculated on a yearly basis in one lump sum for a certain length of time say 10 years, should the GST be paid even for the amount pertaining to the unexpired period.
The two-member bench of M.P. Ravi Prasad and Mashood ur Rehman Farooqui ruled that the activity of maintaining the facilities at the layout from the funds collected from the members of the Society is a service attracting GST.
The AAR further ruled that the contributions collected by the applicant from the member of the housing society either annually or once in ten years, such amount when utilized for sourcing of goods or service from the third person for the common use of its member, the amount utilized in that particular tax period, from both individual contributions and from the endowment fund, must be divided by recipients of such service in the society and if the said amount per member does not exceed Rs.7,500 in that tax period, such amount is exempted from tax as per entry No. 77 of Notification No. 12/2017 Central Tax Rate dated June 28, 2017, as amended by the Notification No.2/2018-dated January 25, 2018, and if that amount per member in that tax period of Rs.7,500, then the entire amount is taxable.
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