AAR and AAAR Weekly Round-Up

This weekend summary provides an analytical synopsis of the most major stories of Goods and Service Tax Authority for Advance Ruling (AAR) and Appellate Authority for Advance Ruling (AAAR) that were authored at Taxscan.in during the one week from to April 1 to April 8, 2023.

GST applicable on Voluntary Gratuitous Payment from Outgoing Members of Housing Cooperative Society: AAAR 2023 TAXSCAN (AAAR) 117

The bench of Dr D K Srinivas and Rajeev Kumar Maharashtra Appellate Authority of Advance Ruling (AAAR) has ruled that GST is payable on voluntary gratuitous payment from an outgoing member of a housing cooperative society.

MAAR has observed that considering the Model Bye-Laws No. 7 (e) & 38 (e) (ix) of the Cooperative Housing Societies, the appellant cannot recover an additional amount towards donation or contribution to any other funds or under any other pretext from transferor or transferee by the housing society. Society cannot collect amounts as voluntary donations from the Transferor or Transferee over the premium i.e. Rs. 25,000/- fixed by the society for the transfer of flats.

Further the bench held that the contribution by the outgoing member is nothing but Advance amounts paid to the society for services carried out or to be carried out for the members of the Society and is therefore taxable as per the GST Laws.

Amount of Surety Bond forfeited/encashed from outgoing Contractual Employee attracts nil GST: AAR 2023 TAXSCAN (AAR) 203

The Haryana bench of Kumud Singh, and Sunder Lal, Authority for Advance Ruling (AAR), ruled that the Amount of Surety Bond forfeited/encashed from outgoing contractual employee attracts nil GST.

The Bench observed that “GST is not applicable to Amount of Surety Bond forfeited/encashed from outgoing contractual employee.”

GST Rate Applicable on Lease of Pre-owned Motor Vehicles as per Central Tax Rate Notification: AAR 2023 TAXSCAN (AAR) 201

The Haryana bench of Sunder Lal and Kumud Singh, Authority for Advance Ruling ( AAR ) ruled that the Goods and Services Tax ( GST ) Rate is applicable on the lease of pre-owned motor vehicles as per the notification of the Central Tax Rate.

The bench, after perusing all the aspects of the matter at hand i.e. the factual details as well as the legal provision applicable observed that in the present case, it can be said that the supply of leasing of the pre-owned motor vehicle is for the furtherance of business.

According to the authority, leasing a pre-owned vehicle is a taxable event, and the rate of tax is to be determined in accordance with notification no. 11/2017-CT(R) dated as amended, serial no. 17 (VI), which states that the tax is to be charged at “the same rate of central tax as applicable on supply of like goods involving the transfer of title in goods.” Also, the applicable compensation cess must be calculated in line with notification no. 1/2017-compensation cess (Rate), which has been issued on June 28, 2017.

Residents Society collecting CAM Charges for Services Provided to its Resident Members attracts GST: AAR 2023 TAXSCAN (AAR) 202

The Two-Member Bench of Sunder Lal, and Kumud Singh the Haryana Authority for Advance Ruling (AAR) observed that the Residents Society collecting Common Area Maintenance (CAM) charges for services provided to its resident members attracts GST.

The Bench observed that “Residents Society collecting CAM charges for services provided to its resident members attracts GST.”

GST Not Applicable on Notice Pay Recovery from Outgoing Employee: AAR 2023 TAXSCAN (AAR) 203

The Haryana bench of Sunder Lal, and Kumud Singh, Authority for Advance Ruling (AAR), observed that GST is not applicable on Notice Pay Recovery from Outgoing Employee.

The bench observed that “CGST Act, 2017. Notice pay does not result into the provision of service by either party, it is sort of compensation either to employee or employer and not a consideration. It is a safety valve sort of option to both the parties i.e. if one of the party frustrate the employment contract either by reneging or by failing to perform. It is the employee who is the service provider and service supplied by him in the course of its employment is excluded from the definition of Supply under the GST Act.” The Bench concluded by noting that the amount collected as Notice Pay Recovery from outgoing employee attracts nil GST.

GST leviable on Welfare Activities done by Residents Society for its Resident Members: AAR 2023 TAXSCAN (AAR) 202

The Haryana bench of Sunder Lal, and Kumud Singh, Authority for Advance Ruing (AAR), ruled that GST is leviable on welfare activities done by Residents Society for its resident members. The applicant in the present matter is M/s Valley Residents Welfare Society, which is a welfare society.

Monthly contribution collected from the members by the society is used for the purpose of making payments to the third parties in respect of commonly use services or goods which includes facilities like lift, water pump, health and fitness centre, swimming pool, payment of electricity bill for common area, maintenance of parking spaces, maintenance of parks, disposal of garbage and cleanliness etc. The bench observed that “GST can be levied on welfare activities done by Residents Society for its resident members.”

No GST on Amount collected from Employees for providing New ID Cards: AAR 2023 TAXSCAN (AAR) 203

The Haryana bench Sunder Lal, and Kumud Singh Authority for Advance Ruling (AAR), observed that there is no GST on Amount collected from Employees for providing new ID Cards. The applicant in the present matter is Rites Limited

The Coram observed that “The Id-card is reissued in case of loss of the same or the card is in non-serviceable condition. In this matter, the authority is of view that this transaction does not fall under the taxable event under the GST as it’s covered under the schedule Ill(l) appended with the CGST Act, 2017.”

No GST on Amount of Creditors Balance Unclaimed/Untraceable, Written Off by Crediting P&L Account: AAR 2023 TAXSCAN (AAR) 203

The Haryana bench of Sunder Lal, and Kumud Singh Authority for Advance Ruling (AAR), ruled that there is no GST on Amount of Creditors Balance Unclaimed/Untraceable, Written Off by Crediting Profit and Loss (P&L) Account. The applicant in the present matter is Rites Limited

The Bench observed that “The authority is of view that there are no services received or provided by the applicant company in the above mentioned situations/transactions. So, this transaction of writing off unclaimed amount of the contractors/other creditors is basically an income and not a supply, hence outside the purview of scope of supply under the GST Act.

MoHUA not exempted from GST on sale of commercial built-uparea: AAAR 2023 TAXSCAN (AAAR) 118

The Delhi Bench of Mallika Arya and S.B Deepak Kumar (Appellate Authority for Advance Ruling (AAAR) has held that the Ministry of Housing and Urban Affairs (MoHUA), is not exempt from Goods and Service Tax (GST) on sale of commercial built-up areas.

The Division bench held that, The MoHUA, Government of India, was not exempted from payment of GST on sale of commercial built-up space, as it was not related to any function entrusted to a municipality under Article 243 W of the Constitution. Hence, the exemption under S. No 4 of Notification No. 12/2017- Central Tax (Rate) and parallel notifications under SGST and IGST were not admissible. The Bench further observed that, MoHUA, Government of India was not a Municipality under Articles 243P and 243Q of the Constitution. Also, since such services were being provided to business entities, exemption under S. No. 6 of the said Notification was also not admissible.

Other Charges like Water Supply Connection Charges, Electricity Meter and Security Deposit Amounts are Inextricably Linked with Construction of Residential Apartment, attracts 12% GST: AAAR directs to Refund Excess Tax Collected 2023 TAXSCAN (AAAR) 119

The Maharashtra bench of Rajeev Kumar Mital and Dr DK Srinivas observed Appellate Authority for Advance Ruling (AAAR) ruled that the other charges like water supply connection charges, electricity meter and security deposit amounts are inextricably linked with construction of residential apartment and attracts 12% GST and directed the applicant to refund excess tax collected.

The Two-Member Bench determined that “Insofar as the challenge to the levy of service tax on taxable services as defined under Section 65(105) (zzzzu) is concerned, we do not find any merit in the contention that there is no element of service involved in the preferential location charges levied by a builder.”

The Bench concluded by noting that other charges which are inextricably linked to services by way of construction of residential apartment /dwelling are part of a bundled service with principal service of construction of residential apartment /dwelling. The rate of tax applicable on such services would be 12% as applicable to the construction service.

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