AI Drafter 
TaxTMI 
TaxTMI 
2019 (11) TMI 155
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...., clubhouse, swimming pool, lifts, etc., provides lighting in common area, undertakes periodic up-keep of equipments etc., in the play area, etc. They collect annual contributions from its members calculated on the basis of super built-up area owned by the members. In addition they collect contribution towards corpus fund for future contingencies. They are registered under the Goods and Services Act, 2017. In view of the above, the applicant has sought advance ruling in respect of the following questions:- i. Whether the applicant is liable to pay CGST and SGST on the amount of contribution received from its members? ii. If the answer to (i) above is "yes", whether it can avail the benefit of Notification No. 12/2017 dated 28-6-2017 (SI No. 77) read with Notification No.2/2018 dated 25-1-2018 which provide for exempting from tax, the value of supply up to an amount of Rs. 7,500 per month per member ? iii. If the answer to (ii) above is "yes", whether it is required to restrict its claim of input tax credit ? iv. Whether the applicant is liable to pay CGST/ SGST on amounts which it collects from its members for setting up a corpus fund 3. Th....
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....l amount of input tax credit. iv. The applicant with regard to collection of amounts towards corpus fund from its members contends that the amounts so collected are mere deposits and they are under obligation to refund them to its members if it is not spent. Therefore, it is not liable tax. PERSONAL HEARING: / PROCEEDINGS HELD ON 28.06.2018 4. Sri. Vishnu Murthy, Chartered Accountant and duly authorised representative of the applicant appeared for personal hearing proceedings held on 28.06.2018, reiterated the facts narrated in their application and furnished written submissions, inter alia stating as under:- a) The applicant is an association formed by filing a declaration under the provisions of Karnataka Apartment Ownership Act, 1972 and under the said Act, it is mandatory for individual flat owners to come together and form themselves into an association for the purpose of maintaining and managing the common areas and facilities in the condominium and it is incumbent on the association to carry out such functions. Thus, the applicant performs its activity as a duty mandated under a statute; it does not perform them as discharging any contractual obligati....
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....he second question i.e. whether, the amount of Rs. 7,500/- per month per person as specified in Notification No. 12/2017 dated 28-06-2017 (SI.No.77), as modified by Notification No.2/2018 dated 25-01-2018, is deductible in determining the value of its taxable supplies even when the amounts so collecting from its members exceed Rs. 7,500/- per month per member, the applicant submits their views as under: g) The applicant states that Home Owners Association enjoyed exemptions from tax even in the service tax regime. First of such exemption was given in terms of the following notification: Notification No. 8/2007 - Service Tax dated 01-03-2007 - the taxable services provided by a resident welfare association where the sole criteria for its membership is the residential status of a person in a residential complex to its members, from the whole of the service tax leviable thereon, subject to the condition that the total consideration received from individual member by the said association for providing the said services does not exceed three thousand rupees per month. The applicant states that on analysis of the above notification it could be seen that the Ass....
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....ody or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution - 1. As a trade union; 2. For the provision of carrying out any activity which is exempt from the levy of Goods and Services Tax; or 3. Upto an amount of seven thousand five hundred per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex Nil Nil j) The applicant states that an analysis of the above notification would reveal that every home owner's association would enjoy the benefit of exemption from tax under the Act up to an amount of Rs. 7,500/- per month per member and such exemption will be available even in circumstances where the contribution by individual members is in excess of Rs. 7,500/- per month. k) The applicant states that in case of any doubt, the rules of interpretation of statutes should be interpreted in the way the construction which is beneficial to the assessee. The applicant relied upon the following judgements in support of their contention:- ....
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.... individual contribution of Rs. 7,500/-per month. n) The applicant's views on the third question, i.e. whether, it can avail input tax credits of the whole of the amount of taxes paid on its inputs and input services, if it is held that it need not pay tax under the Act on individual contributions of Rs. 7,500/- per month, are as follows: o) The restrictions with regard to input tax credit is contained in sub-section (2) of section 17 of the Act and it provides as follows:- "Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies." p) The phrase "exempt supplies" is defined under Section 2(47) of the Act and the same is as follows:- "Exempt supply" means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or ....
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....f the Act and it reads as under: "Consideration" in relation to the supply of goods or services or both includes- (a) Any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person. (b) The monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person." It is evident from the above, the applicant states, that for an amount to get transformed into "consideration", either there should be actual supply of goods or services or there should be a promise to supply goods or services. If the "supply" aspect is missing, then the amount received will not be in the nature of 'consideration'. In the instant case, the amount received by the association is not for the purpose of supplying any goods or services. It is an amount which will be invested by the association and the returns generated therefrom might be used for effecting supply of goods or services or both to the members. Therefore....
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....supply of goods or services or both made for a consideration by a person in the course or furtherance of business, and by definition what is supplied by the applicant is a service as it is not goods. It is the supply of maintenance services and the activities of the applicant are covered under the definition of "business" as is defined in sub-section (17) of section 2 of the CGST Act, 2017. 5.5 The term of "consideration" as defined in sub-section (31) of section 2 of the CGST Act, clearly includes any payment made in respect of or in response to the supply of services. As explained earlier, the amount of consideration is towards the supply of maintenance services provided by the applicant to it members. The profit motive is not the criteria to qualify an activity as a business activity or otherwise. Further, no activity is mandated to be done as per any law for the time being in force or otherwise. 5.6 Summing up the above, GST is levied on intra-State and inter-State supply of goods and services. According to section 7 of CGST Act, 2017, the expression "supply" includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, renta....
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....red as a composite supply, then the principal supply would be the "Supply of services by the Home Owner's Association" and hence the entire supply would be treated as a composite supply of such service. Regarding the services, the supply of services is made in common to all the members and it is only reimbursement of charges or share of contribution. 5.9 The second question is related to applicability of exemption under entry No. 77 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 as amended by the Notification No. 2/2018 - dated 25-01-2018. The said entry reads as under: SI. No Chapter, Section, Heading, Group or Service Code (Tariff) Description of services Rate (per cent) Condition 77 Heading 9995 Service by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution - (a) .........................; (b) For the provision of carrying out any activity which is exempt from the levy of Goods and Services Tax; or (c) Upto an amount of seven thousand five hundred per month per member for sourcin....
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....under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies." In the instant case, as already discussed, the applicant is involved in supply of taxable service, if the contribution exceeds Rs. 7,500/- per month per member and also involved in exempted supply of service when the contribution is upto Rs. 7,500/-. Therefore the applicant is providing partly taxable as well as partly exempted supply of service. Therefore, the applicant is liable to restrict the claim of input tax credit to the extent of exempt turnover as per Rule 42 of the CGST Rules 2017, which is related to common input tax credits. For the unrestricted amount of input tax credit, the applicant can avail the benefit of input tax credit. However, this is again subject to the restriction and ineligibilities as enumerated in the Act and rules made thereunder. 5.12 The fourth question is related to the liability of GST on the amounts collected for corpus fund from members. It is seen that this amount is collected as a de....