RWAs liable to pay GST on members’ monthly contribution, only on amount exceeding Rs.5000 or Rs.7500: Madras HC quashes AAR Ruling [Read Order]

RWAs- GST - Madras High court - AAR Ruling - Taxscan

The Madras High Court while quashing the Authority of Advance Ruling  (AAR) held that the Resident Welfare Association (RWA) liable to pay GST on the members’ monthly contribution, only on the amount exceeding Rs.5000 / Rs.7500 and not on the entire amount.

In the month of July, the  TVH Lumbini Square Owners Association, Purasawalkam sought for the advance ruling on the issue that if the monthly maintenance charges payable by a member of the association exceeds Rs.7500 per month, in the context of exemption as per S.No. 77 of Notification 12/2017 – Central tax (Rate) dated June 28, 2017 as amended by Notification 2/2018 – Central Tax (Rate) dated January 25, 2018, the applicant is liable to pay GST only on the amount in excess of Rs.7500 or on the entire amount.

The Tamil Nadu Authority of Advance Ruling held that if a service by the applicant, a registered housing society/resident welfare association to its members by way of reimbursement of charges or share of contribution, for sourcing of goods or services from a third person for the common use of its members, is such that it is above 7500 rupees per month effective from 25.01.2018 ( 5000 rupees before), it is not eligible S1 No 77 (c ) of Notification No.12/2017-C.T.(Rate) dated 28.06.2017 as amended for CGST and of S No 77 (c) of Notification No.11(2)/CTR/532(d-15)/2017 vide G.O. (Ms) No. 73 dated 29.06.2017 as amended for SGST. CGST and SGST at appropriate rates are to be paid by the members on the full amount of reimbursement of charges or share of contribution.

The TVH Lumbini Square Owners Association moved the Madras High Court against the AAR’s ruling.

Representing TVH Lumbini Square Owners Association, Mr. G. Natarajan, Advocate argued that at the time of introduction of GST the Central Board of Indirect Tax and Customs issued a Flyer clarifying that GST is payable only on the amount in excess, but later they changed track and issued a circular to the contrary. Wherever the intention was to deny the exemption if the consideration exceeds a fixed sum, it was specifically provided like in the case of performing artists, where GST is exempted only if their charges for performance is less than Rs.1,50,000, whereas in case of RWA, the exemption was upto Rs.7,500 it was argued.

The single judge bench of Justice Anita Sumanth held that 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.

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