Homeowner Association liable to pay GST on Contributions made by Members and can avail Exemption If contribution does not exceed Rs.7,500: AAR [Read Order]

The Authority of Advance Ruling (AAR) in Karnataka on an application made by the applicant held that the homeowner association is liable to pay Central Goods and Service Tax (CGST) and State Goods and Service Tax (SGST). Further, the applicant can also avail of the exemption only on the condition that the contribution made by the members is not more than Rs. 7,500/-. And the corpus funds are not taxable.

In this case, the applicant is M/s Vaishnavi Splendour HomeOwner Association, which is an association that comprises 88 members. These members maintain common areas such as gardens, corridors, pathways, swimming pools, etc. This association collects annual contributions from its members which can be calculated on the basis of the super built-up area owned by the members. Furthermore, they collect contributions in the name of corpus funds for future contingencies.

These were 4 issues raised in this application namely:

1. Whether the association is liable to pay CGST and SGST on the number of contributions received from the members?
2. If in case the answer to the above issue is ‘yes’ then can the association avail the exemptions?
3. If in case the answer to the above issue is ‘yes’ whether the claim of Input Tax Credit (ITC) can be restricted?
4. Whether the corpus funds are taxable under CGST and SGST or not?

The Authority of Advance Ruling (AAR) in Karnataka comprised of Sri Harish Dharnia, Additional Commissioner of Central Tax and Dr. Ravi Prasad M.P., Joint Commissioner of Commercial Tax while addressing the above issues held that, the association is liable to pay both Central Goods and Service Tax (CGST) and State Goods and Service Tax (SGST) on the sum of amount received from its members.

The AAR also said that the benefit of exemption can be granted to the applicant only in the case when the contributions i.e. the maintenance charges are not more than Rs. 75,00 per month.

In the case of inward supply of goods, the applicant can claim Input Tax Credit (ITC) in accordance with the restrictions prescribed under Section 172(2) of the CGST Act and Rule 42 of CGST Rules.

Lastly, it was held that the applicant is not liable to pay CGST or SGST in the case of corpus funds.