The Gujarat Authority of Advance Ruling (AAR) in its recent ruling in the case of M/s. The Capital Commercial Co-op. (Service) Society Limited has ruled that GST will be applicable on the common maintenance fund/deposit collected from by a Cooperative Society from its members.
Facts of the case:
- The applicant M/s. The Capital Commercial Co-op. (Service) Society Limited, “applicant” is a registered Commercial Co- Operative service society providing services of maintenance of
common facilities/amenities to their members. The applicant has collected money from their members under following heads: - i) Monthly maintenance fees (Recurring basis).
- ii) Common Maintenance Fund/Deposit (one-time basis).
- Based on such respective sale deeds executed between the developer and all the individual purchasers of the units under this commercial complex scheme, the applicant service society has received advance maintenance fees of Rs.6.50 per square foot per month and also Rs.250/- per square foot of built -up area from each purchasers of units in this commercial complex scheme who have eventually become member of this service society now.
- The Applicant has filed their return of income also by showing the Monthly maintenance fees collected by them as their direct income under profit and loss account and paid income tax on the net profit portion. Whereas the one time common Maintenance fund collected from members has been shown as “Maintenance Deposits” under their current liability head of Balance Sheet. And, thus, it is not forming part of their income as per income tax return filed by applicant.
- The applicant understands that advance received for initial 24 months for maintenance fees is against the future supply of maintenance services by it to their members which is covered under section 7 of CGST Act and thus has paid the GST on the same.
Questions on which Ruling is sought:
Question 1: Whether applicant is liable to pay GST on the common maintenance fund/deposit collected from their members?
Question 2: If Yes, then, what shall be considered as the time of supply for such transaction?
Order of Gujarat AAR: Deliberations and Ruling
- The definition of consideration is inclusive and consideration may be in cash or kind. The payment received will not be treated as consideration, if there is no direct link between the payment and supply. From the close scrutiny of above definition, it is clear that there should be a close nexus between the payment and supply and thus, any payment/exchange/barter etc. would be treated as consideration for supply and liable to GST. Prima facie a conclusion can be drawn without much difficulty that a deposit given in respect of the supply shall not be considered as payment made for such supply unless the supplier appropriates such deposit as consideration for the said supply.
- The applicant, in addition to maintenance charges, also collected amount as Common Maintenance Fund (Deposit) from their members which is non-returnable. Since, the said amount is collected as non-returnable common maintenance fund, such deposits can be considered for such supply of service as mentioned above and, hence, will be liable to tax.
- The proviso to the clause (31) of the Section 2 of the CGST Act, 2017, 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 common maintenance fund/deposit so collected is the amount collected towards the future supply of service of maintenance, repair etc. and accordingly, gets applied as consideration towards supply of services only at the time of actual supply of services. Therefore, the amount collected towards the common maintenance fund/deposit do not form part of consideration towards supply of services at the time of collection, however, the amounts so utilized for provision of service are liable to GST at the time of actual supply of service.
In view of above deliberations the Coram consisting of Sanjay Saxena and Mohit Aggarwal held that the applicant is liable to pay GST on the common maintenance fund/deposit collected from their members. It was further held that the amounts so utilized for provision of service are liable to tax at the time of actual supply of service.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
