The Maharashtra Appellate Authority of Advance Ruling (AAAR) in its recent order in the case of M/s Apsara Co-Operative Housing Society while upholding the ruling of the AAR has adjudged that GST is payable on property tax, water charges, common electricity charges, etc. collected by Society as it amounts to ‘Supply’ of services.
Facts of the case:
- The Appellant, M/s Apsara Co-Operative Housing Society is a Co-operative Housing Society, registered under the Maharashtra State Co-operative Society Act 1960.
- The main objects of the Appellant as per the Bye-laws are inter-alia to obtain the conveyance from the promoter, to manage, maintain and administer the property of the Society, to raise funds for achieving the objective of the Society, to undertake and provide for, on its own account or jointly with Co-operative etc.
- For the purpose of obtaining the above objectives of the Society, the Appellant raises funds by collecting contributions from the members of the Society, which are also called “charges in terms of the Bye-laws.
- The Society charges include property taxes, water charges, common electricity charges, contribution to repair and maintenance fund, contribution to the sinking fund, services charges, car parking charges, interest on the default charges, non-occupancy, insurance charges, etc.
- The said charges are collected by the Society on monthly or quarterly basis by issuing the invoices and uses these for the specified purposes as enumerated in the Bye-laws.
Issues raised before AAR:
The appellant had raised following issues before the Maharashtra AAR:
i) Whether the activities carried out by Appellant would amount to supply and whether the same are liable to GST.
ii) Whether they are correctly discharging the GST liability, for which they provided the illustrative invoices raised on the members of the society.
Ruling of AAR:
- Maharashtra AAR held that activities carried out by the Appellant would amount to supply in terms of Section 7(1)(a) of the CGST Act,2017 and accordingly would attract GST, as provided under Section 9 of the CGST Act,2017.
- For arriving at the aforesaid conclusion , they had referred to Section 2(17) of the CGST Act to conclude that the said activities have been carried out by the Appellant for consideration in the course or furtherance of business, and hence the same would qualify as “supply” in terms of Section 7(1)(a) of the CGST Act,2017.
- Answer to the second question was not given stating that it cannot be answered in terms of Section 97(2) of the CGST Act.
Being aggrieved the Appellant has filed appeal before Appellate Authority for Advance Ruling (AAAR).
Order of Maharashtra AAAR: Deliberations and Order
- All the activities of Appellant would rightly get covered under the definition of term ‘business’ as provided under section 2(17)(e) of the CGST Act,2017, which unequivocally stipulates that 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 would be included under the meaning of the term business.
- The term ‘service’ has been rendered a very wide connotation. It is clear that the activities undertaken by Appellant would rightly be covered under scope of the term ‘service’.
- Since the Appellant is providing services to its members against the consideration named as ‘society charges’ in the course or furtherance of business, therefore , the activities would be construed as ‘supply’ in terms of Section 7(1)(a) of the CGST Act ,2017 , and accordingly will be liable for GST.
- As regards second question raised i.e. whether they are correctly discharging their GST liability we agree with ruling of AAR wherein they have held that it cannot be answered in terms of Section 97(2) of the CGST Act.
In view of the above deliberations the two member bench of Sanjeev Kumar and Rakesh Kumar Sharma ruled that activities carried out by the Appellant would amount to supply in terms of Section 7(1)(a) of the CGST Act, 2017 and the same would be liable for GST subject to the condition that the monthly subscription or contribution charged by the society from its members is more than Rs.7500 per month per member and the annual aggregate turnover of the society by way of supplying of services and goods is also Rs.20 lakhs or more.
Also Read: GST on Resident Welfare Associations (RWA)
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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.
