MAHARASHTRA AAR RULING – GST TO BE APPLICABLE ON HOUSING SOCIETY MAINTENANCE CHARGES
Once again the Maharashtra AAR ruling authority has maintained that it shall be valid to levy GST if the maintenance charge on a building exceeds a prescribed limit, then such amount shall be chargeable under GST on 14th July 2020.
Earlier, in a case related to a Cooperative Housing Society (CHS) namely the Nariman Point Cooperative housing society (CHS) had submitted whether the activities of the members in a housing society were a taxable the GST ruling authority held that its activities towards its members were "taxable supply" under the GST Act. In other words, levying of GST on the maintenance of building charges shall be valid to levy and charge.
However, the CHS had argued that the principle of mutuality for its opinion that since it did not supply anything to its members concerned, no GST should apply to costs like maintenance charges for the CHS. On the other hand, the ruling authority finally relied upon a notification issued earlier in the form of a Government circular date 22.07.2019, it shall be obligatory for the CHS to levy GST by the present rate i.e. 18 percent per annum on the number of entire maintenance charges paid by every member of the society if they exceed the prescribed limits i.e., rupees 7500 per month.
Where does the ruling doesn’t hold good?
Though, such societies, where the annual turnover is either equal to rupees twenty lakhs or lesser, do not require registration under the provisions of the GST. Therefore, the maintenance charges paid by such CHS shall not attract GST. In other words, no obligation to pay GST shall arise in the case of smaller societies irrespective of the quantum of maintenance charges under the provisions.
Accordingly, taking note from the circular dated 22.07.2019 the ruling authority under GST held that circular concerned gave a clear indication of the intention on the part of the government to bring such societies under the purview of GST. The Nariman Point CHS had consequently, had charged and received maintenance charges for maintaining the current and future costs of the society necessary for its well-being like payment of various bills like electricity charges, water bills, and other common costs.
At last, the ruling authority of Maharashtra held that the advance rulings have a persuasive value in such types of cases and the parties are free to appeal against the order concerned.
Conclusion
Various tax experts have reacted differently to the ruling given by the authority holding the argument that the ruling is irrelevant and incorrect, especially considering the view given by the Supreme Court of India concerning the case of Calcutta Club and had upheld "principle of mutuality" that was not considered by the AAR authority here. Whereas the Maharashtra AAR maintained that since the term “supply” had a wide meaning under GST.
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