TaxTMI 
TaxTMI 
2026 (3) TMI 565
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.... funds to the association, raises funds in form of contribution from its members for common area maintenance which includes the supply of water to its members, invoices its members on quarterly basis for common area maintenance. The contribution is collected based on the area of the apartment i.e. per sq. ft. rate. 3. In view of the above, the applicant has sought advance ruling in respect of the following questions: I. Whether the availability of exemption up to an amount of Rs. 7,500/- per member per month for sourcing of goods or services for common use of its members under entry No. 77 of notification 12/2017-Central Tax (Rate) dated 28-06-2017 (as amended) is to be ascertained on per annum basis i.e. 90,000/- (7500*12) per financial year per member or on the basis of invoicing period i.e. Monthly/ Quarterly Invoicing? II. Whether contribution collected from members for supply of water procured through water tanker or BWSSB are covered under entry 99 of Notification. 2/2017 Central Tax (Rate) dated 28-06-2017 i.e. under HSN Code 2201 and therefore exempt? III. Whether the applicant is liable to pay GST on amounts which it collects from its members ....
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....ence, the instant application is admissible under Section 97(2)(b), 97(2)(c) & 97(2)(e) of the CGST Act, 2017. 5. BRIEF FACTS OF THE CASE:- The applicant submits that it currently avails the exemption of up to Rs.7,500 per month per member for sourcing goods and services for the common use of its members under Entry No. 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 02/2018. The applicant also states that it supplies water to its members, and the consideration for such supply is presently recovered as part of the common area maintenance charges. Where the per-member monthly charges exceed Rs.7,500, GST is discharged on the entire consideration, treating the activity as a composite supply of maintenance services. 5.2 The applicant plans to issue separate invoices for water charges, recovered at actuals, and seeks to claim exemption for such supply under Entry No. 99 of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017, under HSN 2201. The applicant also plans to collect deposits/advances in the form of corpus/sinking funds for future contingencies relating to general repairs and maintenance. Additionally, the applic....
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....t further submits that upon acquisition of the capital asset out of the sinking/corpus fund, the asset is capitalized in the books and depreciation is charged annually as per the accounting policy. Correspondingly, an equivalent amount is transferred from the deposit account to the income & expenditure account, thereby applying a proportionate portion of the deposit as consideration for the actual supply of service rendered to members over the life of the asset. Thus, the applicant contends that the deposit is applied gradually, in proportion to depreciation, since the asset remains available for use by the members throughout its useful life. Accordingly, the applicant understands that the application of deposit towards consideration must be made proportionate to depreciation, as this reflects the actual period and extent of service derived from the capital asset. 6.5 The Applicant states that Entry 77 of Notification No. 12/2017-Central Tax (Rate), as amended, exempts the share of contribution received from members for sourcing goods or services from third parties for the common use of members. The Applicant submits that the exemption entry does not distinguish between periodic....
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....t appeared for personal hearing proceedings held on 20.11.2025, before this authority and reiterated the submissions already made along with the application. Further, Authorised Representative submitted the fact that the deposit collected from members are refundable in nature, if there is cancellation of RWA membership (i.e. selling of property). FINDINGS & DISCUSSION 8. At the outset we would like to make it clear that the provisions of the CGST Act, 2017 and the KGST Act, 2017 are in pari materia and have the same provisions in like matters and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act. 9. We have considered the submissions made by the applicant in their application for advance ruling. We have also considered the issues involved on which advance ruling is sought by the applicant, relevant facts, and the arguments made by the applicant and the submissions made by their learned representative during the time of hearing. 10. We have carefully examined the application m....
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....using society or a residential complex. Nil Nil From the above, it is very clear that the exemption of Rs.7,500 per month per member, in respect of sourcing of goods or services from a third party for the common use of its members in a housing society or residential complex, is available on a monthly basis, irrespective of the pattern of issuance of invoices, whether monthly or quarterly. 13.1 The second question raised by the applicant is:- "Whether contribution collected from members for supply of water procured through water tanker or BWSSB are covered under entry no. 99 of Notification. 2/2017 Central Tax (Rate) dated 28-06-2017, as amended i.e. under HSN Code 2201 and therefore exempt? 13.2 Applicant's Submission:- I. The applicant submits that GST is leviable only when there is a "supply" as defined under Section 7 of the CGST Act, 2017, and that tax is chargeable on the value determined under Section 15 of the Act, 2017. II. The applicant has relied upon the definitions of "goods" and "services" under Sections 2(52) and 2(102), respectively, contending that water qualifies as goods, being movable property, and is specifically covered under E....
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....ly of goods or supply of services as referred to in Schedule II.] 13.5 According to Section 7 of CGST Act, 2017, the expression "supply" includes the activities or transactions, by a person, other than individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration. The term person is defined in Section 2 (84) of the CGST Act, 2017 and d same is as under: "Person" includes- (a) An individual; (b) ..... .......... .......... (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) ........ .......... .......... 13.6 It is a fact that the applicant (such as a housing society/apartment association) is registered under the Karnataka Apartment Ownership Act, 1972. This means it is a legal entity, not just a group of individuals. The applicant carries out activities like: maintenance of common areas, day to day management, renewal of upkeep of common area facilities, work of emergency nature for repair, painting of the building, rectification/modification, addition or alteration of buildin....
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....ble. While it is not in dispute that water, per se, may qualify as "goods" under Section 2(52) of the CGST Act, 2017 and is covered under Entry No. 99 of Notification No. 02/2017-Central Tax (Rate), the crucial aspect to be examined is the nature of the supply made by the applicant. In the present case, the applicant is engaged in providing upkeep and maintenance services to its members. The procurement, storage, pumping, and distribution of water through common infrastructure form an integral and incidental part of such upkeep and maintenance services. The applicant does not undertake independent supply or trading of water as goods. Water is supplied only in conjunction with and as a component of the overall maintenance services. As per Section 2(30) of the CGST Act, 2017, a composite supply consists of two or more supplies which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. In the present case, the principal supply is upkeep and maintenance services, and the supply of water is ancillary thereto. 13.10 Accordingly, the entire consideration collected from the members, including amou....
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....her person but shall not include any subsidy given by the Central Government or a State Government Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; 14.4 It is evident from the above definition that an amount to get transformed into "consideration" either there should be actual supply of goods or services or both or there should be a promise to supply of goods or services. The applicant himself stated that the corpus/sinking fund collected is the amount collected towards the future supply of service and gets applied as consideration towards the supply of services only at the time of actual supply of services. 14.5 There are well-recognized distinctions between an advance and a deposit. An advance is generally a payment made upfront toward a future supply and is typically non-refundable, whereas a deposit is ordinarily refundable and held as security, subject to return upon occurrence of specified conditions. It is an admitted and established fact that the applicant is an Association constituted for....
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....ctual supply of service (Capital asset purchase) can be proportion to the depreciation charged in books of accounts in relation to a capital asset?" 15.2 In this regard, the applicant contends that the deposit should be treated as consideration only at the time of actual supply of services and in proportion to the depreciation of the related capital asset. They explain that sinking/corpus funds are collected to procure capital assets for members' common use and are initially recorded as liabilities. Once the asset is acquired, it is capitalized and depreciated over its useful life. Each year, an amount equal to the depreciation is transferred from the deposit account to income, thereby reducing the deposit liability. This transfer represents the application of the deposit towards the actual supply of services, which is considered to occur over the useful life of the capital asset as it is made available for members' use. 15.3 The applicant's contention that consideration arises only in proportion to depreciation charged in the books of accounts is not acceptable. Firstly, the CGST Act, 2017 is a self-contained code and the levy, valuation, and timing of tax are....
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....mon area maintenance collection for determination of availability of exemption? 16.2 The fifth and sixth question are interlined and combined reading of both the question, it is understood that the applicant basically want to ruling on: "Whether the exemption up to an amount of Rs.7,500 per member per month for sourcing of goods or services for the common use of members under Entry No. 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended) is available in respect of sinking/repair fund contributions collected from members, either at the time of actual supply of services when such deposits are applied as consideration or at the time of collection treating them as advances; and if such exemption is available, whether the sinking/ repair fund contributions are required to be clubbed with common area maintenance charges for the purpose of determining eligibility for the said exemption ?" 16.3 In this regard, the applicant contends that Entry No. 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, exempts the share of contribution received from members for sourcing of goods or services, or both, from third parties for t....
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....the society 2. Corpus Fund / Sinking Fund:- The corpus fund (also called sinking or reserve fund) is collected one-time or infrequently, and it is specifically earmarked for capital or major non-recurring expenditures, such as: • Major structural repairs of the building • External/internal painting of the building • Replacement or major overhaul of lift etc. This demonstrates that the corpus fund is ring-fenced, separately accounted for, and used only for specific long-term capital purposes and Because: • The monthly maintenance charges constitute consideration for ongoing services, and • The corpus fund is not a payment for any current supply of service but a contribution toward future supply of service and • The corpus fund is independently maintained and restricted in use • . Thus, the nature of collection of monthly maintenance charge and sinking fund/corpus fund are distinct in character and purpose. Accordingly, the corpus fund/sinking fund can be treated as separate and independent from monthly maintenance charges for GST applicability. 16.6 Entry No. 77 of Noti....
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....supply and, therefore, is not liable to GST. 17.3 We find that the applicant is collecting voluntary donations from its members for the celebration of cultural and religious festivals such as Ganesh Chaturthi, Dussehra, etc. It is observed that such contributions are made purely on a voluntary basis and there is no compulsion on the members to make such payments, nor is there any specific or identifiable benefit or service promised by the applicant to the contributing members in return. Under Section 7 of the CGST Act, 2017, a transaction qualifies as a "supply" only when there is a provision of goods or services or both for a consideration. Further, as per Section 2(31) of the CGST Act, 2017, "consideration" necessarily implies a payment made in respect of, in response to, or for the inducement of a supply. Section 9 of the CGST Act provides that GST is leviable only on such supplies made for a consideration. In the present case, we find that the voluntary donations collected by the applicant do not involve any quid pro quo, as the applicant is not under any contractual or statutory obligation to provide any goods or services in return for such donations. The contribution....