2026 (3) TMI 343 - AAR - GST

Advance receipt as supply: corpus contributions taxable on collection; monthly per-member exemption does not apply.

Collection of corpus funds by an unincorporated membership organisation constitutes a supply to its members because contributions are advances towards ... Scope of 'supply' - activities or transactions by a person (other than an individual) to its members for cash or other valuable consideration - Collection of a corpus fund by an unincorporated membership organisation for future capital expenditure - Advance payment treatment - Exemption under Entry No. 77 of Notification No. 12/2017-Central Tax (Rate) - Whether the collection of corpus fund from members for the purpose of meeting future capital expenditure amounts to a “supply” under Section 7 of the CGST Act, 2017. Supply - Collection of corpus fund from members for future capital expenditure is a supply. - HELD THAT: - The Authority applied the Explanation to Section 7(1) to treat the association and its members as distinct persons and examined the definition of consideration. The proviso to the definition of consideration excludes a deposit from being consideration unless it is applied as such. The Authority distinguished advances from deposits, noting advances are payments toward future services and not ordinarily refundable whereas deposits are typically refundable. The applicant is a legal entity performing services for members, and the services fall under the classification for membership organisations (Chapter Heading 9995, Service Code 999598). On these findings the corpus contributions were held to be advances (not mere deposits) and thus constitute consideration; accordingly, the collection of corpus fund qualifies as a supply under Section 7 of the CGST Act, 2017. [Paras 15] Collection of corpus fund from members amounts to a supply under Section 7 of the CGST Act, 2017. Time of supply - GST on corpus fund advances is payable at the time of receipt/collection. - HELD THAT: - Having held the corpus to be an advance for future supply, the Authority applied the time of supply provisions for services. Section 13(2)(a) makes the time of supply the earlier of the date of issue of invoice or the date of receipt of payment. Since corpus amounts are collected in advance prior to supply or invoicing, the receipt of payment triggers the time of supply. Consequently, tax liability arises at the time of collection/receipt of the corpus amounts. [Paras 16] GST on corpus fund collections is payable at the time of collection in terms of Section 13(2)(a). Exemption under Entry No. 77 of Notification No. 12/2017-Central Tax (Rate) - HELD THAT: - The Authority examined Notification Nos. 11/2017 and 12/2017 and Circular No. 109/28/2019-GST. It distinguished monthly maintenance charges-applied to recurring day-to-day services-from corpus funds, which are infrequent, earmarked for capital or major non-recurring works. Given the distinct character and purpose of corpus collections, the Authority concluded they stand separate from monthly maintenance and therefore cannot be aggregated with maintenance charges to claim the Rs.7,500 per member per month exemption under Entry No. 77. As the exemption is inapplicable to corpus contributions, questions about month-wise or pro rata application of the threshold do not arise. [Paras 17, 18] The exemption under Entry No. 77 is not available in respect of corpus fund contributions and such amounts cannot be aggregated with monthly maintenance charges for claiming the Rs.7,500-per-member-per-month exemption. Final Conclusion: The Authority ruled that corpus fund collections by the apartment owners association constitute a supply; GST is chargeable at the time of collection; and the Rs.7,500-per-member-per-month exemption under Entry No. 77 does not apply to corpus fund contributions. Issues: (i) Whether collection of a corpus fund by an unincorporated membership organisation for future capital expenditure constitutes a 'supply' under Section 7 of the CGST Act, 2017; (ii) If so, whether GST is payable at the time of collection (receipt) of the corpus fund or at the time of its utilisation; (iii) Whether the corpus fund collection is eligible for the exemption of Rs. 7,500 per member per month under Entry No. 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, and if eligible, the basis for determining the exemption.Issue (i): Whether collection of corpus fund by the association constitutes a supply under Section 7 of the CGST Act, 2017.Analysis: Section 7(1) and clause (aa) extend the scope of 'supply' to activities or transactions by a person (other than an individual) to its members for cash or other valuable consideration, and the Explanation treats an association and its members as distinct persons. The definition of 'consideration' in Section 2(31) includes payments made in respect of or in response to a supply, subject to the proviso that a deposit is not consideration unless applied as such. The nature of corpus contributions, as proposed, is to fund identified future services and capital works for members; the services are classifiable under the membership organisations heading (Scheme of Classification of Services, service code for home owners associations). The amounts collected are therefore advances towards future supply rather than refundable deposits.Conclusion: Collection of corpus fund by the association constitutes a 'supply' under Section 7 of the CGST Act, 2017.Issue (ii): If corpus collection is a supply, whether GST is payable on receipt (collection) or on utilisation.Analysis: Section 13(2)(a) fixes the time of supply of services as the earlier of the date of issue of invoice (if within prescribed time) or the date of receipt of payment. Corpus amounts are received before any invoice or actual performance of the future supply; therefore, time of supply principles treating advance receipt as triggering tax liability apply.Conclusion: GST is payable at the time of collection/receipt of the corpus fund in terms of Section 13(2)(a) of the CGST Act, 2017.Issue (iii): Whether the corpus fund is eligible for the Rs. 7,500 per member per month exemption under Entry No. 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, and the method of applying the exemption if eligible.Analysis: Notification No. 12/2017-CT(R) Entry No. 77 and related entries deal with services by unincorporated bodies to their own members by way of reimbursement or share of contribution, with a specific sub-item limiting exemption to amounts up to Rs. 7,500 per month per member for sourcing goods or services from a third person in a housing society. Circular No. 109/28/2019-GST clarifies the application of the Rs. 7,500 threshold to maintenance charges. Corpus contributions are infrequent, earmarked for capital or non-recurring expenditures and are distinct in character and purpose from regular monthly maintenance charges; they cannot be aggregated with monthly maintenance to claim the per-member monthly exemption.Conclusion: The exemption of Rs. 7,500 per member per month under Entry No. 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 is not available in respect of corpus fund collections.Final Conclusion: The Authority rules that corpus fund collections by the association are advances amounting to supply under Section 7 of the CGST Act, 2017; the time of supply is the date of receipt/collection under Section 13(2)(a); and the Rs. 7,500 per member per month exemption under Entry No. 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 does not apply to corpus fund collections.Ratio Decidendi: Corpus contributions earmarked for future capital expenditure by an association registered under law are advances constituting 'supply' to members under Section 7(1)(aa); such advances trigger tax liability on receipt under Section 13(2)(a); and corpus contributions, being distinct from recurring maintenance charges, do not qualify for the per-member monthly exemption under Entry No. 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.