Shishir Sinha | New Delhi, June 9 | Updated on: Jun 09, 2022

‘GST is not leviable on electricity and water charges collected from residents’

Any amount collected periodically, along with the monthly maintenance charges by the Resident Welfare Association (RWA), which exceeds ₹7,500 will attract GST, said Telangana’s Authority for Advance Ruling (TSAAR).

A circular by the Central board of Indirect Taxes & Custom (CBIC), dated July 22, 2019, lays down fulfilment of two conditions for the imposition of GST on monthly subscription/contribution charged by a Residential Welfare Association (RWA) from its members. Accordingly, the RWA shall be required to pay GST on monthly subscription/contribution  charged from its members, only if such subscription is more than ₹7,500 per month/member, and the annual aggregate turnover of RWA by way of supplying of services and goods is ₹20 lakh or more. Also, In case the charges exceed ₹7,500,the entire amount is taxable.

Judicial scrutiny

The issue has been facing Judicial scrutiny. While the Maharashtra and Tamil Nadu AAR held that the entire amount exceeding ₹7,500 will be taxable, a Single Judge Bench of the Madras High Court that held only amount in excess of ₹7,500 will be taxed. However, a Division Bench stayed this decision. The matter is yet to be settled.

In the present matter, Rangareddy-based Jayabheri Orange County Owners Association collects monthly maintenance charges, certain annual fee (sinking fund) and charges for electricity used in the common area. It sought advance rulings on three issues. First, is GST applicable on monthly collection not exceeding ₹7,500 per member as the total collection of the society is more than ₹20 lakhs a year?

Second, is GST is applicable on total monthly maintenance of ₹7,500 per member, plus annual sinking fund collected in July or august month? And third, is GST is applicable on monthly collection of common area electricity charge paid by the members, in addition to the ₹7,500 monthly maintenance charged?

After going through all the facts and hearings, the AAR took note of a GST notification (12/2017) and observed that when the aggregate turnover of a RWA exceeds ₹20 lakh in a financial year and the amount collected for maintenance exceeds ₹7,500, then the entire amount is chargeable to GST at the rate of 18%. For example, if the maintenance charges are ₹9,000 per month per member, GST at the rate of 18 per cent shall be payable on the entire amount and not on the difference amount (₹1,500).

The AAR said any amount collected periodically, along with the monthly maintenance charges, are covered under the said notification. Therefore, “they are taxable if the total amount collected by the RWA by whatever name — monthly maintenance or sinking fund — exceeds ₹7,500,” it said, while adding that nevertheless, GST is not leviable on electricity and water charges collected from residents.

Published on June 09, 2022