The Madras High Court stayed the single bench ruling on GST on Contributions by Resident Welfare Association (RWA) members in excess of Rs. 7,500 per month.
The single bench of Justice Anita Sumanth ruled in favour of various RWAs and held that “the conclusion of the AAR as well as the Circular to the effect that any contribution above Rs.7,500 would disentitle the RWA to exemption, is contrary to the express language of the Entry in question and both stand quashed. To clarify, it is only contributions to RWA in excess of Rs.7,500 that would be taxable under GST Act.”
Mrs. R. Hemalatha, Senior Standing Counsel appearing for the appellants. The four propositions of law are raised by the appellants in these appeals. As per Section 15, it is the transaction value that is subjected to GST and transaction value would be the entire amount contributed towards the maintenance charges. The transaction value cannot be bifurcated. Since no exemption is granted when the amount exceeds Rs.7500/- the entire transaction value would be subjected to tax. The word ‘upto’ can be interpreted in both ways. It could either mean exemption is granted only when the transaction value is less than Rs.7500/- or exemption is granted only for Rs.7500/- when the transaction value is more than 7500/-. Under the negative list approach, with effect from 1 July, 2012, notification No.25/2012-ST provides for exemption to service by a RWA to its own members by way of reimbursement of charges or share of contribution up to five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members.
The exemption is intended for the middle class and not for the owners of luxury apartments. The legislative intention could be seen in the Budget speech 2012-13 where the exemption for the monthly charges payable by a member to housing society was raised from Rs.3000 to Rs.5000. While discussing the Affordable Housing Scheme, it was said that the said proposal is to make the life of those who own an apartment a little easier.
The division bench of Justice TS Sivagnanam and Justice Sathi Kumar Sukumara Kurup in the Union of India v. M/S.TVH Lumbini Square Owners Association while posting the matter for further hearing on December 9, 2021 said that the legal issue has to be decided as because the learned Single Bench not only quashed the proceedings of the Tamil Nadu Authority for Advanced Ruling, but also the Circular issued by the Department, which needs verification.
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