TMI Blog2022 (6) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... is no corresponding service being provided separately by the tax payer society? - whether the applicant society can legally collect the so called gratuitous and voluntary donation from a transferor of a flat in the society? - HELD THAT:- n 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 contributions are made by the outgoing members only because they have been a part of the said society. It is not that an outsider has given any contribution to the applicant society. The receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dients of GST levy, it is taxable. There are no hesitation in holding that the receipt of gratuitous payment from an outgoing member is taxable under the CGST Act, 2017. 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? - HELD THAT:- This question raised in the application was withdrawn by the applicant during the course of the Final Hearing and therefore, both the questions are not taken up for discussion. - GST-ARA-30/2021-21/B-71 - - - Dated:- 31-5-2022 - SHRI. RAJIV MAGOO, AND SHRI. T. R. RAMNANI, MEMBER NO. GST-ARA-30/2020-21/B-71 Mumbai, dt. 31.05.2022 PROCEEDINGS (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017, decision of the Hon'ble Supreme Court of India, in the Case of Calcutta Club Limited v State of West Bengal vide C.A. No. 4184 of 2009, decision of the Hon'ble Jharkhand High Court in case of Ranchi Club Ltd v Chief Commissioner, decision of the Hon'ble Gujarat High Court in the case of Sports Club of Gujarat Ltd v UOI and the decision of the Maharashtra AAAR Ruling for Rotary Club of Mumbai Nariman Point to support its contention that maintenance charges collected by the society are in the form of reimbursement collected for upkeep of the premises, where no benefit goes to the society each every expense is incurred from the maintenance charges collected by the society is to maintain the society premises. Similarly, the expenses incurred by the society are already subject to GST and charging tax on maintenance fees would amount to double taxation. 2.5 As per Sec 7 of the CGST Act, 2017, supply should be made in the course of furtherance of business. A gratuitous payment by an outgoing member cannot be regarded as a consideration but rather in substance is a gift to the society as the member is paying on his own volition. The applicant believes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtain in return from the Society. 03. CONTENTION - AS PER THE CONCERNED OFFICER: OFFICER'S SUBMISSIONS DATED 06.09.2021:- 3.1 On perusal of the definition of the term service , it is adequately clear that the term service under the CGST Act, 2017 has a very wide connotation, which is evident from the presence of the expression anything other than goods, money and securities . In view of this, it is clear that the activities undertaken by the Applicant have been covered under the scope of the term service . 3.2 Further, as per clause (e) under Section 2(17) of the CGST Act, 2017, provision of any facilities or benefits by a club, association, or society to its members against a subscription or any other consideration would be construed as business. In the present case also, the Applicant is undertaking various sorts of activities for the members of the society against the contribution called maintenance charges , which can reasonably be construed as consideration in terms of Section 2(31) of the CGST Act, 2017. Thus, applicant is undertaking up keeping and maintenance activities for the benefits of its members, it is clear beyond doubt that under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay as a member in society, he has a gratitude towards society and accordingly he makes voluntary payment to the society. Hence, it is a consideration received to the society against supply of services. The claim of applicant is that the receipt of a gratuitous payment from an outgoing member for the time he has resided in the society cannot be taxable under the CGST Act, 2017 as there is no corresponding service being provided separately by the tax payer society, is not tenable. As outgoing member has received the services provided by society during his stay as a member in society. As he has satisfied with the services received by him, he has a gratitude towards society and accordingly he makes voluntary payment to the society. Hence, it is a consideration received to the society against supply of services. Hence, taxable under CGST Act 2017. 3.5 An advance does not earn any return on it, whereas a deposit earns interest. An advance has to be utilized for the specific purpose for which the advance is made, whereas utilization of a deposit depends entirely on the person with whom it is deposited. GST is not applicable on deposit in view of section 2 (31) of GST Act. But GST is ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed) to such members who have made contributions. 4.2 The application was admitted and final e-hearing was held on 26.04.2022. The Authorized Representative of the applicant, Shri. Akshay Shah, Learned Partner was present. The Jurisdictional officer, Shri. S. T. Mohite, ACST, MUM-VAT-D-821, Nodal-2 was present. Question No. 3 is withdrawn by applicant voluntarily. The matter was heard only with respect to Question No. 2. 05. OBSERVATIONS AND FINDINGS: 5.1 We have gone through the facts of the matter, documents on record and submissions made by both, the jurisdictional officer as well as the applicant. 5.2 Question No. 1 raised in the application was withdrawn by the applicant during the course of the Preliminary Hearing and Question No. 3 raised in the application was withdrawn by the applicant during the course of the Final Hearing and therefore, both the questions are not taken up for discussion. 5.3 The second question i.e Question no.2 asked by the applicant is as under: Whether the receipt of a gratuitous payment from an outgoing member for the time he has resided in the society be taxable under the CGST Act, 2017 as there is no corresponding service bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the provisions of Section 29(2)(a) of the Act. (c) In the event of ineligibility (in view of the provisions of section 29(2)(a) (b) of the Act) of the member to transfer his shares and interest in the capital/property of the Society, the Committee shall direct the Secretary of the Society to inform the member accordingly within 8 days of the decision of the Committee. (d) No Objection Certificate of the Society is not required to transfer the shares and interest of the transferor to transferee. However in case such a certificate is required by the transferor or transferee, he shall apply to the Society and Committee of the Society may consider such application on merit, within one month. (e) The Transferor/Transferee shall submit following documents and make the compliance as under: (i) Application, for transfer of his shares and interest in the capital/ property of the society, in the prescribed form, along with the share certificate; (ii) Application for membership of the proposed transferee in the prescribed form; (iii) Resignation in the prescribed form; (iv) Stamp duty paid agreement; (v) Valid reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferee in transgression of the Model Bye Laws of Cooperative Housing Societies in Maharashtra and therefore the amounts received by the society from the Transferor cannot be considered as Voluntary donations. 5.7 Vide its reply dated 29.04.2022, the applicant has stated that it was submitting an Affidavit by an outgoing member (Mr. Sanjay Prakash Sahjwani), which states that the payment is solely made out of his own discretion and not in lieu of NOC or any other Service. We have perused the said document submitted by the applicant and find that the said document is not clear and complete. However, from whatever can be seen in the said Affidavit, we observe that the amount of Rs.17,70,000/- has been given to the society by the outgoing member towards Building Betterment Fund of the Society and it is clearly stated that the amount is inclusive of GST. The signature of the Deponent in the copy produced in advance ruling hearing Affidavit, date, etc are also missing. The applicant has produced unclear incomplete copy of affidavit and avoided to produce the original of said affidavit. 5.8 This issue of transfer charges was before the Bombay High Court in the case of Alankar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution by the applicant from its members whether outgoing or not, is only because of the fact that the members are or have been a part of the society. If the applicant society had received contributions from outsiders to the effect that the same was a donation then probably on case to case basis it could have been treated differently. 5.10 Even the half baked and incomplete copy of affidavit submitted by the applicant in respect of an out going member by the name Mr. Sanjay Prakash Sahjwani mentions that the amount is being given towards 'Building Betterment Fund'. Further, the applicant has also submitted a copy of the Affidavit of Shri Chandresh Thakker, Treasurer of the Applicant Society, wherein it is mentioned that the amount given by the outgoing member Mr. Sanjay Prakash Sahjwani (towards 'Building Betterment Fund') has been transferred by the Applicant Society towards 'Major Repairs Fund'. Thus, it is clear that the amount is paid for receipt of services from the society when the Major Repairs are being carried out or will be carried out. Therefore, the said contribution is nothing but Advance amounts paid to the society for services to be receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajor Repairs in future as is seen from the Affidavit submitted by Shri Chandresh Thakker, Treasurer of the Applicant Society. 5.12 Activities rendered by the applicant Society to its members are supply of services in view of the amended Section 7 of the CGST Act, 2017 and contributions/charges collected by the Applicant Society from its members are chargeable to tax under the GST Laws. This has been accepted by the applicant and accordingly it has withdrawn Question Nos. 1 and 3 of the application. We have held above that the contributions received from outgoing members are payments for taxable services received from the applicant in the past and for taxable activities of the applicant in future pertaining to Major Repairs to be undertaken. 5.13 We also reproduce the contents of para 2 of the application as under: When there is a transfer of a flat, the outgoing member makes a gratuitous payment in gratitude of payment. The same does not have any implications on outgoing formalities to be completed as per the Maharashtra Co-operative Societies Act. The Applicant states that the above contribution made is entirely voluntary and is not at all a consideration received in lie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 5.16 From the definition reproduced in the above para above, we find that 'consideration' includes -any payment made (in the subject case payment is made by the Transferor which is termed as voluntary contribution by the applicant) in money and since the payment is made towards Major Repair Funds of the Society, it is clear that the said payment is for the inducement of, the supply of goods or services or both, either by the recipient if he continues to be a member, or by any other person (meaning, other members). There is a famous case of M/s MP Finance Group CC (In Liquidation) v C SARS reported in 69 SATC 141 in which one important legal proposition explained and the High Court of Appeal ruled that income 'received by a taxpayer from illegal gains will be taxable in the hands of the taxpayer. Thus though the collection of charges of society might be illegal under some other law, but since it is covered by the scope of supply and other ingredients of G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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