Apartment Owners Association Liable for GST on Maintenance Charges

The Apartment Owners Association is liable to pay GST on maintenance charges collected from members as it constitutes a taxable supply of services. The association qualifies for exemption under entry no. 77 of Notification No. 12/2017 for services provided to members up to Rs. 7,500 per month per member. The exemption is applied on a per flat basis for members owning multiple flats. If maintenance charges exceed Rs. 7,500, the entire amount becomes taxable. Additionally, electricity charges paid to BESCOM and recovered from members are subject to GST, while Corpus/Sinking Fund collected is not taxable at the time of collection but when utilized for services.

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Issues Involved:
1. Liability of GST on maintenance charges.
2. Applicability of exemption under entry no. 77 of Notification 12/2017 for maintenance charges.
3. Basis of exemption applicability (per member or per flat).
4. Applicability of exemption when maintenance charges exceed Rs. 7,500/-.
5. GST liability on electricity charges paid to BESCOM and recovered from members.
6. GST liability on Corpus/Sinking Fund collected from members.

Detailed Analysis:

1. Liability of GST on Maintenance Charges:
The Applicant, an Apartment Owners Association, is engaged in providing maintenance services for common areas. As per Section 2(17) of the CGST Act 2017, the term "business" includes the provision of facilities or benefits to members by an association for a subscription or other consideration. Section 7(1) of the CGST Act 2017 defines "supply" to include all forms of supply of goods or services for a consideration by a person in the course or furtherance of business. Therefore, the activity of procuring goods and services for maintenance and collecting monies from members is considered a taxable supply of services under GST.

2. Applicability of Exemption under Entry No. 77 of Notification 12/2017:
The exemption under entry no. 77 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 2/2018 - Central Tax (Rate) dated 25.01.2018, applies to services provided by a non-profit entity to its members up to an amount of Rs. 7,500/- per month per member for sourcing goods or services from a third person for common use. The Applicant, being a non-profit organization registered under the Karnataka Apartment Owners Association Act 1972, qualifies for this exemption.

3. Basis of Exemption Applicability (Per Member or Per Flat):
As clarified in Circular No. 109/28/2019-GST dated 22.07.2019, the exemption of Rs. 7,500/- per month per member is applied separately for each residential apartment owned by a member. Therefore, if a member owns multiple flats, the exemption is applicable on a per flat basis.

4. Applicability of Exemption When Maintenance Charges Exceed Rs. 7,500/-:
The exemption of Rs. 7,500/- is available only if the maintenance charges do not exceed Rs. 7,500/- per month per member. If the charges exceed Rs. 7,500/-, the entire amount becomes taxable. For example, if the maintenance charges are Rs. 9,000/- per month per member, GST is payable on the entire Rs. 9,000/- and not just on the amount exceeding Rs. 7,500/-.

5. GST Liability on Electricity Charges Paid to BESCOM and Recovered from Members:
The electricity charges paid to BESCOM for power consumed towards common facilities and separately recovered from members are liable to GST. The Applicant recovers the actual charges paid for common area power consumption from members. These charges form part of the consideration for the supply of maintenance services and are thus taxable.

6. GST Liability on Corpus/Sinking Fund Collected from Members:
Corpus/Sinking Fund collected from members is not liable to GST at the time of collection, as it is considered a deposit for future supply of services. As per Section 2(31) of the CGST Act 2017, deposits given for future supply are not considered payment until applied as consideration. Therefore, the amounts collected towards the Corpus/Sinking Fund do not form part of the consideration for the supply of services at the time of collection but are taxable when utilized for the provision of services.

Ruling:
1. The activity of procuring goods and services for maintenance and collecting monies from members is liable to GST.
2. 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, applies to maintenance charges collected from members.
3. The exemption up to Rs. 7,500/- is applicable on a per flat basis when members own more than one flat.
4. The exemption of Rs. 7,500/- is available only if the maintenance charges do not exceed Rs. 7,500/- per month per member. If the charges exceed Rs. 7,500/-, the entire amount is taxable.
5. Electricity charges paid to BESCOM for common facilities and recovered from members are liable to GST as part of the consideration for maintenance services.
6. The Corpus/Sinking Fund collected from members is not liable to GST at the time of collection but is taxable when utilized for the provision of services.

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