TMI Blog2019 (11) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, and includes activities specified in Schedule II to the CGST Act, 2017. The definition of business in section 2(17) of CGST Act states that business includes provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members. The term person is defined in section 2(84) of the CGST Act, 2017 to include an association of persons or a body of individuals, whether incorporated or not, in India or outside India. The activity of the applicant is a provision of services to its members, and it is in the form of reimbursement of charges or share of contribution and the applicant is a non-profit entity. Taxability of the transaction - HELD THAT:- The service is covered under the Heading 9995. As per the Annexure to Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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. Liability of GST on the amounts collected for corpus fund from members - HELD THAT:- It is seen that this amount is collected as a deposit and is utilised by the applicant as when required. The contributions are made by the members to the applicant as contributions to the corpus fund and not in relation to any service in particular. The proviso to the above clause states that the deposit given in respect of a future supply shall not be considered as payment made for such supply until the supplier applies such deposit as consideration. In the instant case the corpus / sinking fund so collected is the amount collected towards the future supply of service and accordingly gets applied as consideration towards supply of services only at the time of actual supply of services. Therefore the amounts collected towards Corpus / Sinking Fund do not form part of consideration towards supply of services at the time of collection and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding of law in respect of the aforesaid questions as under:- i. The applicant with regard to liability of GST on the amount of contribution received from its members submits that,- a. The applicant is an association within the meaning of Section 3(d) of Karnataka Apartment Ownership Act, 1972. Accordingly, it is an association constituted by the statute and is not a voluntary association . It undertakes administration, maintenance, repair or replacement of the common area pursuant to Section 3 (g) of the Act. The association is performing activities as mandated by the statute and not pursuant to any contract between itself and its members. b. The applicant contends that only such of the activities performed pursuant to a contract are covered within the scope of supply of goods or services as described in Section 7 of the Act. It would not cover activities performed pursuant to the Karnataka Apartment Ownership Act, 1972. Since the levy of tax is on the activity of supply and because the activities do not amount to supply as defined under Section 7 of the CGST Act, 2017, there would not be any incidence of tax on the activities performed by the applicant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of transactions performed in discharge of contractual obligations. It would not get triggered in circumstances where one performs his activities under a statutory mandate. In this regard, the applicant relies on section 7(1) of the Act which delineates the scope of the expression supply and section 2(31) of the Act, which explains the scope of the expression consideration . Therefore, the applicant is of the view that its activities would not amount to supply of any goods or services or both and the contributions received by it from its members towards maintenance of common areas and facilitates will not answer the description of consideration given under the Act and hence it would not be liable to pay any tax under the Act. c) The applicant has also extracted the provisions of the Karnataka Apartment Ownership Act, 1972 and section 10 of the said Act provides as follows:- 10. Common profits and expenses.- The common profits of the property shall be distributed among and common expenses shall be charged to, the apartment owners according to the percentage of the undivided interest in the common areas and facilities. d) Thus, the applicant states that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which none of the individual members contributed more than ₹ 3,000/- per month and the second group comprised of the associations in which at least one member contributed to more than ₹ 3,000/- per month. The first group was given exemption but the second group was not given any such exemption. Thus, under the above notification, some of the associations enjoyed exemption, while others did not. h) The applicant continued that the above legal position was changed by issuing the Notification No. 25/2012-ST dated 20.06.2012 wherein the Central Government exempted the following taxable services from the whole of service tax,- 28(c) Service by an unincorporated body or 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 upto an amount of five thousand rupees 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. The applicant states that on analysis of the above notification it would reveal that the earlier requirement of classifying the associations into two g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. The applicant relied upon the following judgements in support of their contention:- a. CIT v. A. J.Abraham Anthraper 268 ITR 417 = 2004 (4) TMI 62 - KERALA HIGH COURT b. CIT v. J.Palemar Krishna 342 ITR 366 = 2009 (10) TMI 631 - KARNATAKA HIGH COURT . c. CIT v. South Arcot Society 176 ITR 117 (SC) = 1989 (1) TMI 3 - SUPREME COURT d. CIT v. Mahindra Mahindra Ltd 144 ITR 225 (SC) = 1983 (9) TMI 1 - SUPREME COURT l) The applicant states that there is another dimension to the whole issue. The applicant provides electricity and water, in addition to other facilities to its members, supply of which is exempt from tax under the Act. If the applicant is made liable to pay tax on the entire amount of contributions received by it, it would amount to making it pay tax on the supply of such exempted items as well. This would amount to department trying to tax something which it cannot tax directly and might raise issues regarding constitutional validity. May be for this purpose the authorities have thought it fit to extend the benefit of exemption up to an amount of ₹ 7,500/- per month per member, to all home owner's associations, since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply. q) The applicant states, in so far as the receipt of contributions by the applicant is concerned, they are exempt to the extent of ₹ 7,500/- per month per member. In other words, the contributions are exempt partially. They are not wholly exempt from tax. Therefore, having regard to the definition of exempt supply given in Section 2(47) of the Act, the supplies by the applicant to its members would not be an exempt supply . They also state that unless the supply amounts to an exempt supply , the restrictions contained in section 17(2) of the Act do not come into play. Unless the provisions contained in sub-section (2) of section 17 are triggered, there will not be any requirement to restrict the input tax credit. Therefore, the applicant is of the view that notwithstanding the fact that it is not liable to pay tax on contributions to the extent of ₹ 7,500/- per month per member, it would still be eligible to claim credit of the entire input tax. r) The applicant further submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffecting supply of goods or services or both to the members. Therefore, the applicant is of the view that amount received by the association for setting up a corpus fund would not be liable to tax under the Act. 5. FINDINGS DISCUSSION: 5.1 We have considered the submissions made by the applicant in their application for advance ruling as well as the additional submissions made by Sri Vishnu Murthy, Chartered Accountant who appeared during the personal hearing. We also considered the issues involved on which advance ruling is sought by the applicant and relevant facts. 5.2 At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act. 5.3 The applicant seeks advance ruling in respect of the questions mentioned at para 2 supra. We proceed to answer the questions one at a time sequentially. The Applicant is a Homeowners' Association with 88 members. They maintain the common area, provide lighting in common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, and includes activities specified in Schedule II to the CGST Act, 2017. The definition of business in section 2(17) of CGST Act states that business includes provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members. The term person is defined in section 2(84) of the CGST Act, 2017 to include an association of persons or a body of individuals, whether incorporated or not, in India or outside India. Further, Schedule II of CGST Act, 2017 enumerates activities which are to be treated as supply of goods or as supply of services. It states in para 7 that supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of goods. A conjoint reading of the above provisions of the law implies that supply of services by an unincorporated association or body of persons (AOP) to a member thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (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 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 The activity is covered under clause (c) of the entry 77 and reading together Services by 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 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 is exempted from the levy of CGST. 5.10. Further, in relation to the said exemption, the applicant contends that when the monthly subscription exceeds ₹ 7,500/-, then also they are entitled to claim the said exemption of ₹ 7,500/- and the tax need to be paid only on the remaining amount of monthly contribution. This issue is dealt with an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deposit and is utilised by the applicant as when required. The contributions are made by the members to the applicant as contributions to the corpus fund and not in relation to any service in particular. Clause (31) of section 2 of the CGST Act, 2017 defines the term consideration which is as under:- (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 the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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