TaxTMI 
TaxTMI 
2022 (6) TMI 191
X X X X Extracts X X X X
X X X X Extracts X X X X
....no corresponding service being provided separately by the tax payer society? 3. Whether major repairs to be made in the future for the co-operative housing society, for which amounts are collected, be taxable at all as it is for the members only? And if taxable, whether the same is taxable at the time of its collection or whether the same would be taxable on utilization of such funds? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT 2.1 The Applicant is a co-operative housing society registered under the Maharashtra Co-operative Housing Society Act (MCHS Act) having 48 Flats which charges to its members, maintenance charges as per flat towards maintenance and upkeep of its premises. 2.2 When there is a transfer of a flat, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection of corpus fund is only a transaction in money, which is kept outside the definition of "goods" or "services". The sinking fund amount becomes a taxable supply only w here the amount is utilized towards the major repairs for which the sinking fund was collected. APPLICANT's SUBMISSIONS DATED 29.04.2022- 2.7 Under the CGST Act, for a transaction to be considered as taxable, there must be a supply of Goods by one person to another for a consideration, and in the course or furtherance of business applicant submits that in case of a voluntary contribution by an outgoing Member the payment is not made in any inducement of any supply & hence this cannot be considered as a consideration. 2.8 Applicants submits a Letter of NOC dtd 11.02.2020 by the Society to a particular outgoing member which states that the Member has duly paid Share Transfer Fees or Rs 25,000/- as per the Maharashtra Cooperative Societies Act by Laws and there are no outstanding dues of the said member, post which, a voluntary contribution was made by the outgoing member. Further, the applicant submits an Affidavit by the outgoing member which states that the payment is solely made out of his o w n discreti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....son', 'business' and 'supply' are now self-contained, unqualified and wide enough to include the supply by both-incorporated and unincorporated clubs to its members and by their extensiveness completely does away with the principal of mutuality and the Hon'ble Gujarat High Court Judgment in the case of Sports Club of Gujarat Limited Vs. Union of India (2010) 35 V5T 375 (Gujarat HC), pronounced under the erstwhile the Finance Act. 1994, is not applicable to facts and circumstances of the instant case. Further, clause (c) of Sl. 77 of Notification No. 12/2017-C.T.R., dt 28.06.2017 as amended by Notification No. 2/2018-C.T.R., dt 25.01.2018 stipulates that, 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 up to an amount of seven thousand five hundred rupees per month per member for sourcing of goods or services from a third party for the common use of its members in a housing society or a residential complex is exempt from levy of GST. Thus, it can clearly be inferred from the provisions of aforesaid notification that any amo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e near future, hence liable to be taxed at the time of receipt. Repairs of building is treated as service in GST Act-The rules for the time of supply under GST plays a very important role in determining when to pay tax for a transaction. The general rule for time of supply for services is earliest of the following - * Date of issue of invoice * Date of receipt of payment/advance * Date on which invoice should be issued This means that if the advance is received before the issue of the invoice the time of supply would be the date of receipt of advance. Thus, taxpayers receiving advance must pay GST on the money received as advance. Thus, money collected by society as sinking fund for the repair services agreed to be supplied by applicant in the near future is an advance and is taxable under CGST and MGST Acts and to be taxed at the time of receipt. 04. HEARING 4.1 Preliminary e-hearing was held on 27.07.2021. Authorized representatives of the Applicant, Shri. Akshay Shah, Partner of company and Shri. Adit Shah, Consultant were present. The Concerned Nodal Officer Shri. Ganesh Londhe, Asst. Commissioner of State Tax, MUM-VAT-D-821, Nodal 02, Mumbai was also present The Autho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icant and therefore such amounts received are not liable to GST. 5.5 The jurisdictional officer has submitted that, the gratuitous and voluntary payment received by the applicant from an outgoing member is a payment made for the services rendered by society to the outgoing member during the member's stay in the applicant society. The jurisdictional officer has further submitted that since an outgoing member is satisfied with the quality of services received by him and provided by society during his stay as a member in society, he has a gratitude towards society and accordingly he makes voluntary payment to the society and therefore it is a consideration received to the society against supply of services. 5.6.1 First and foremost we would discuss whether the applicant society can legally collect the so called gratuitous and voluntary donation from a transferor of a flat in the society. We therefore refer to the 'Model Bye Laws of the Co-operative Housing Societies' in Maharashtra. Bye Law No 38 is very relevant in the present case and is therefore reproduced as under: Bye Laws No. 38 Notice of transfer of Shares and interest in the capital /property of the Society.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....39; certificate, required under any law for the time being in force or order or sanction issued by the government, any financing agency or any other authority; (xi) The undertaking/declaration in compliance with the provisions of any law for the time being in force, in such form as is prescribed under these bye-laws. Note : The condition of Sr. No. (ix) above shall not apply to transfer of shares and interest of the transferor in the capital/property of the society to the member of his family or to his nominee or his heir/legal representative after his death and in case of mutual exchange of flats amongst the members. 5.6.2 In view of the above clause (ix), it is expressly clear that, No additional amount towards donation or contribution to any other funds or under any other pretext shall be recovered from transferor or transferee by the housing society. 5.6.3 Further Model Bye law No. 7 of the Cooperative Housing Societies, pertaining to 'raising of Funds' by a housing society, states the various ways how funds can be raised by a Housing Society and clause (e) specifically states that funds can be raised by voluntary donations but not from Transferor or Transferee. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amounts from the flat purchaser, under the garb of 'voluntary donations'. 5.9 Further, we observe that in the instant case, the contributions are received from the outgoing members who have been members of the society in the past and, have received services from the society as envisaged under the GST Act. Thus, it can be said that, Payment from an outgoing member to a society is a payment made for the services rendered by society to the outgoing member during his stay as a member in society. As outgoing member is satisfied with the quality of services received by him and provided by society during his stay as a member in society. Hence, it is a consideration received to the society against satisfaction of the said member on supply of services received from the society. This is akin to the service charges levied by restaurants on which GST is collected. The restaurant collects GST on sale of food and many a times collect a percentage of the Bill amount as service charges (on which GST is levied) which are paid by customers. These service charges can be refused to be paid by the customer in the event that the customer is not happy with the services rendered by the restaurant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid member appears to be on 07.03.2020 (the applicant has mentioned 07.03.2019 which appears to be an inadvertent error). Thus the Hon. Treasurer found it fit to make an Affidavit on 09.11.2021 i.e. more than one year after the subject application was filed and that too, after the date of the Preliminary hearing i.e 27.07.2021 during which the applicant was directed to produce details of income collected as mentioned in Q-2 together with vouchers and details as to what treatment to said income is given in the final accounts and in the income tax returns ; the applicant was asked also to produce declaration or proof taken from such members to prove the fact that said contribution is voluntary and not binding on outgoing members the applicant was further asked to produce details as to NOC or No dues certificate issued (or not issued) to such members who have made contribution. The Affidavit of the Treasurer of the Applicant Society was prepared and made only after these above observations were made by this Authority during the Preliminary Hearing, and therefore preparation of the concerned Affidavit appears to be an afterthought on part of the applicant society. 5.11 To sum up, we f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....society from the Transferors/Transferee as per the Model Bye Laws. We are of the opinion that the amounts are collected for smooth transfer of the flat from the Transferor to the Transferee. 5.14 We are reminded by the observation made by Hon'ble Bombay High Court in the case of Alankar Sahkari Griha Rachana Sanstha Maryadit vs Atul Mahadev and another, mentioned above and agree that, in a situation where a flat purchaser wants a smooth transaction and transfer of the share certificate in his name, the society enjoys a dominant position and under such circumstances, the society may demand payment of amounts from the flat purchaser, under the garb of 'voluntary donations'. 5.15 Finally, we find that the contribution made by the outgoing member is nothing but consideration and we reproduce the definition of the term 'consideration' under the CGST Act as under:- Section 2 (31) of the CGST Act, 2017 :- (31) -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....