RCM provisions on RWA (Residents Welfare Association)

[PANKAJ CHUGH]

Respected Members,

Kindly guide on the following query:

Brief Fact:

the person is a Resident welfare association registered under Societies Registration Act, 1860. It's source of funds is monthly maintenenace collected from residents and also from advertisement, canopy.

The monthly maintenance is less than ₹ 7500/- per member. and annual turnover is also less than ₹ 20 lac.

RWA deploys security guards through a security agency (proprietorship).

Query:

1. whether RWA is required to deposit gst on RCM basis on Security Services ? in terms of Section 9(3) of the CGST Act ?

2. Whether security agency can charge gst in his bill raised to RWA ?

Thanks & Regards

[SOWMYA CA]

Notification No. 13/2017 has notified the list of services where the recipient of the service is liable to pay GST on reverse charge basis. It provides that where the supplier of security services is any person other than a Body Corporate, then the recipient of the services located in the taxable territory has to pay the tax on RCM basis. So the answer to Q1 is Yes if the security agency is not a body corporate, the RWA is required to deposit GST on RCM basis in terms of section 9(3) of the CGST Act.

With respect to the second question, the answer is No. Since the liability of discharging tax is on the RWA, the security agency cannot raise a tax invoice. The RWA needs to raise an invoice and can claim Input tax credit on the same

[PAWAN KUMAR]

dear sir,

As per my view,

if the contribution share is less than ₹ 7500/- per member per month, GST is exempt.

RWA turnover is less than ₹ 20 lakh then there is no requirement for obtain GST registration,

However under RCM it is not apply, RWA need to take registration.

ans for q1-Yes, RWA need to register and need to pay GST on RCM basis.

ans for q2 - NO.

[Shilpi Jain]

Reverse charge on security services is applicable only when the services are provided to a registered person. The society being unregistered, no liability under reverse charge is applicable and thereby no requirement to take registration.

Also in this case since there is no RCM the security agency is required to pay the applicable GST

[KASTURI SETHI]

I strongly agree with the views of Madam Shilpi Jain.

[PAWAN KUMAR]

Dear sir,

In case of forward charge, the requirement to obtain registration subject to ₹ 20 Lakh Threshold limit, but in case of RCM, irrespective of threshold, rwa need to take registration and there will be be rcm liability. plz check, you cannot say rwa is unregistered.

[KASTURI SETHI]

Dissent is decent.

[Alkesh Jani]

Dear Experts,

In this regards, Notification No.13/2017-CT (Rate) as amended from time to time, at column No. 4 of Sl.No.14 (as applicable to Security service), it is mentioned "A registered person, located in the taxable territory." The definition of 'registered person' is given at Section 2 (94) of CGST Act, 2017 and reads as under

"registered person" means a person who is registered under section 25 but does not include a person having a Unique Identity Number"

Section 25 (1) says that (1) Every person (refer S.2(84)) who is liable to be registered under section 22 or section 24shall apply for registration in every such State or Union territory in which he is so liable within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed..."

The question is Section 24 will be applicable to the registered person, and if Societies are excluded from the Section 24 How?

This is purely for knowledge purpose.

Thanks

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

What is brewing in your mind I know and what is brewing in my mind you know very well. Even then I intend to answer to your question on this public forum. My views may not be okayed by you or other experts/readers but it is my moral as well as ethical duty to answer your question as I have strongly supported the views of Madam Shilpi Jain.

(i) RWA is a person as per Section 2(84) of CGST Act. Not in dispute.

(ii) In case RWA's maintenance charges are less than ₹ 7500/- and annual turnover is less than ₹ 20 lakhs, RWA is exempted from GST. If exempted from GST, no need to obtain registration. Not in dispute.

(iii) As per Section 24 (iii) of CGST Act, compulsory registration is for those  persons who are required to pay tax under reverse charge. Not in dispute.

(iv) If service provider (security agency) is individual, firm, trust etc. recipient is liable to pay GST under RCM but if the recipients is unregistered (may be virtue of value based exemption), the service provider himself is liable to pay. Here RWA is out of gamut of Section 24 (iii) . RWA being legally unregistered.

(v) Now liability is on provider of security agency and service provider will pay GST only if his turnover is more than twenty lakhs. If his turnover is less than threshold limit, he will also not pay GST.

(vi) Security Service has been brought under RCM w.e.f 1.1.19 but brining this service under RCM is subject to the conditions laid down in the RCM notification.

Hence in this scenario registration is not compulsory for RWA and RWA is not liable to pay GST.

These are my views in response to your question. With due regards to you as I consider you a very very knowledgeable person.

Difference of views is meant for welfare of all the visitors.

[KASTURI SETHI]

If the conditions mentioned in RCM notification do not bind the recipient of security service, the recipient is out of Section 24 meant for compulsory registration.

[PANKAJ CHUGH]

Respected Members,

Thanks for your guidance. your valuable inputs on the query enlightened many of us. I also support the view of our Hon'ble Expert Kasturi Sethi ji and Ms Shilpi Jain ji.

One question is also raised which i am adding to ongoing discussion which relates to Registration requirment for RWA:

1. RWA having annual turnover from Maintenance Receipts exceeding ₹ 20 lac in a year but monthly subscription less than ₹ 7500/-.per member.

RWA also have income from advertisement, canopy, display board, (generally from outsiders) which comes to ₹ 5 lac in a year.

kindly let us know whether RWA is required to get itself registered under GST ?

Thanks & Regards

[Alkesh Jani]

Shri Kasturiji Sir,

Thanks for your insight on the issue, as you know that you are one of the person who have / had sharpen and shaped my knowledge.

On going through your reply, I can conclude that it is not a litigation free matter as there are different interpretation available. I wrote an article, wherein, it was mentioned that if compulsory registration is to be obtained by Societies, maintaining the records and following the GST procedure will be added burden to its members. It was also urged that Government may issue circular to clarify the issue.

I raised the query, to gain knowledge, as I am in learning phase and wish to be in this phase, today and tomorrow.

Thanks,

With Due Regards,

[SOWMYA CA]

All,

Completely agree with you Shilpi mam and Kasturi Sethi sir... My opinion too is when the RWA is already registered under GST after crossing threshold limit effecting taxable supplies such as renting of common hall for hosting events, move in-move out charges etc. Thank you all for sharing your views. Best Regards

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

I appreciate your humbleness and discipline. I agree with your views at serial no 11 above. In order to avoid unnecessary litigation and save precious time, money and energy of the tax payers, Board should issue clarification. I also suggest that Trade and Industry should make a representation to the Board or GST Council.

[KASTURI SETHI]

Sh.Pankaj Chugh Ji,

With reference to your query at serial no.10 above, in this scenario registration is required and Madam Sowmya CA has already replied to your query. If RWA or any person is registered for any service and that person receives Security Agency's services from individual, firm, trust etc. RCM will be applicable.

[Shilpi Jain]

Also, one more aspect i would want to highlight here is that first we look at section 22 and then 23. As per 23 all exempt supplies by society. So not taking registration is as per section 23. Also section 24 overrides only 22 and not 23. On this ground as well one can take a view that registration not required and RCM liability does not exist.

Though manynmay not agree to this ground.

[KASTURI SETHI]

Whenever there is conditional exemption for any goods or services, it is out of the scope of the concept of 'wholly exempt'.

[Alkesh Jani]

Shri / Ku. Shipliji,

When you say many may not agree, I got nothing to comment.

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Are you one of those 'many' who do not agree ? If so, will you please clarify with reasoning. Just for quenching my thirst for seeking more knowledge on the issue. Humble request and not to be taken otherwise.

[Amit Agrawal]

I agree with view by way post No. 3 by Ms. Shilpi Jain Mam, duly & beautifully expounded by Shri Kasturi Sethi Ji in past No. 8.

I most respectfully disagree with potential 'additional grounds' (to defend non-liability of RWA to get registered under GST) of post No. 15, though from post itself, it is clear that Ms. Shilpi Jain Mam herself very well knows the counter-arguments.

However, considering previous post No. 18, I think Shri Alkesh Jani Ji deserves first chance to respond.

P.S. All above should be treated as strictly personal views of mine only and not a professional advice or suggestion.

[Amit Agrawal]

*In above post, please read as 'Post No. 8' and not past No. 8.

AI Summary

Experts Debate RWA's GST Obligation for Security Services Under CGST Act Sections 9(3), 22, 23, 24 A discussion on a forum centers around whether a Residents Welfare Association (RWA) needs to register for GST and pay tax under the Reverse Charge Mechanism (RCM) for security services. The RWA's monthly maintenance per member is below 7500, and its annual turnover is under 20 lakh. Various experts provide differing opinions: some argue that if the security agency is not a body corporate, the RWA must pay GST under RCM, while others suggest that if the RWA is unregistered, the security agency should pay the GST. The debate touches on interpretations of Sections 9(3), 22, 23, and 24 of the CGST Act, and the need for a clarifying government circular is highlighted.