Housing society cannot claim ITC on repair work contracts as activities constitute membership services, not works contract services under section 17(5)(c)

AAAR held that a housing society cannot claim ITC on works contract services received from contractors for building repairs and renovations. The society's activities constitute services of membership organization under GST, not works contract services to members. The authority rejected the society's contention that it provides works contract services to members, noting this was solely to circumvent ITC restrictions under section 17(5)(c) of CGST Act, 2017. ITC on works contract services is available only when such services are input services for further supply of works contract services, which the society does not fulfill as it is not in the business of providing works contract services.

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Issues Involved:
1. Whether the activities carried out by the applicant for its members qualify as "supply" under Section 7 of the CGST Act, 2017.
2. Whether the applicant is liable to obtain registration under the GST law.
3. Eligibility of the applicant to claim Input Tax Credit (ITC) on input and input services for repairs, renovations, and rehabilitation works.

Detailed Analysis:

Issue 1: Definition of Supply
The Appellant Society initially questioned whether their activities for members qualify as "supply" under Section 7 of the CGST Act, 2017. However, this question was withdrawn during the personal hearing.

Issue 2: GST Registration
Similarly, the question regarding the necessity for the Appellant to obtain GST registration was also withdrawn during the personal hearing.

Issue 3: Eligibility to Claim ITC
The core issue revolves around whether the Appellant Society can claim ITC on the GST paid for works contract services received from their contractor for repairs, renovations, and rehabilitation works.

- Appellant's Argument:
- The Appellant Society argued that they provide works contract services to their members and should be eligible for ITC on the GST paid to the contractor.
- They contended that under Section 16(1) of the CGST Act, 2017, they are entitled to ITC as the services are used in the course or furtherance of business.
- They further argued that Section 17(5)(c) should not apply as they are providing works contract services to their members, thus qualifying for the exception clause.

- Respondent's Argument:
- The Respondent maintained that the works contract services are not a facility provided by a club or society.
- They emphasized that the issue was about the eligibility of ITC on particular inward supply, not the classification of outward supplies.
- They cited a previous decision in the case of Las Palmas Co-op. HSL, where it was held that ITC on works contract services for immovable property is not admissible.

- Appellate Authority's Findings:
- The Authority examined the general activities and functions of a Co-operative Housing Society as per their Bye-laws, which include managing, maintaining, and administering the property of the society.
- It was noted that the society raises funds by collecting contributions (charges) from its members for various services, including repairs and maintenance.
- The Authority concluded that the services provided by the Appellant Society to its members, including repair and renovation services, fall under the heading "services of membership organization" as per Notification No. 11/2017-C.T. (Rate).
- The Authority disagreed with the Appellant's contention that they provide works contract services to their members. It was noted that the society's core function is to manage and maintain the property, not to provide works contract services.
- The Authority held that the Appellant Society is not eligible for ITC on works contract services received from their contractor, as per the restrictions under Section 17(5)(c) of the CGST Act, 2017. The section stipulates that ITC is not available for works contract services when supplied for construction of immovable property, except where it is an input service for further supply of works contract service.

Conclusion:
The Appellate Authority upheld the Advance Ruling passed by the MAAR, concluding that the Appellant Society is not eligible to avail ITC on the GST paid for works contract services received from their contractor. The ruling emphasized that the society's activities are classified under "services of membership organization" and not as works contract services, thereby falling under the restrictions imposed by Section 17(5)(c) of the CGST Act, 2017.

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