The payment received by the Cooperative Housing Society (CHS) from the departing member in the name of gratuitous payment/voluntary contribution is now taxable under the Goods and Services Tax (GST), according to a recent decision by the Maharashtra Appellate Authority for Advance Ruling (MAAR).
The appellant, M/s Monalisa Co-operative Housing Society Ltd, is a cooperative housing society with 48 flats that is registered under the Maharashtra Co-operative Housing Society Act (MCHS Act), offers services to its members, and levies GST on maintenance fees that are collected from those members.
In the instant case, outgoing member of the society, Mr Sanjay Prakash Sahjwani, has made payment of Rs 17,70,000/- to the society which the appellant claims to be voluntary contribution on his own will and volition.
The appellant claimed that when a flat is transferred, the leaving member pays the society a gratuitous and voluntary contribution. The same does not have any implications on outgoing formalities to be completed as per MCHS Act.
On bare perusal of the affidavit submitted by the appellant in respect of an outgoing member by the name Mr. Sanjay Prakash Sahjwani mentions that the amount of Rs 17,70,000/- is being given towards ‘Building Betterment Fund’. It is clearly stated in the affidavit that the said amount is inclusive of GST.
Further, the appellant stated that the contribution made is entirely voluntary and is not at all a consideration received in lieu of services provided by the Appellant.
According to the appellant, a supply must be made in the course of furthering business in accordance with Section 7 of the Central Goods and Services Tax Act, 2017. An outgoing member’s gratuitous payment cannot be viewed as a consideration; rather, it is a gift to the society because the member is making the payment of his own free will.
The appellant further submitted that such payment cannot be treated as consideration as there is no business transacted and the person acts on his own volition in its entirety.
The bench of Rajeev Kumar Mital and Dr. D.K. Srinivasconcurred with the observations of the Maharashtra Authority for Advance Ruling (MAAR) that the said 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.
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