NCC Urban One Apartment Owners Mutually Aided Co-Op. Society Ltd., In re {AUTHORITY FOR ADVANCE RULINGS, TELANGANA} :
Date of Order : 29-09-2023
- Common Area Electricity Charges:
Issue: NCC Urban One Apartment Owners Mutually Aided Co-Op. Society Ltd., as a Resident Welfare Association (RWA), collects common area electricity charges from its members based on actual consumption.
Ruling: The Authority for Advance Rulings (AAR) clarified that the cost of electrical energy supplied by the RWA to its members is not taxable under GST. This is because:
- Exemption Notification: Notification No. 02/2017 – Central Tax (Rate) exempts electrical energy falling under Chapter heading ‘2716 00 00’.
- Pure Agent Concept: As per Rule 33 of CGST Rules, 2017, the RWA acts as a pure agent while collecting these charges. It merely passes on the cost of electricity consumed without adding any additional charge or margin.
- Conclusion: Therefore, since the RWA is not making any profit or adding any markup on the electricity charges collected, and considering the exemption notification, GST is not applicable on these charges.
Elaboration: RWAs like NCC Urban One are responsible for managing and maintaining common facilities such as lighting in common areas. When they collect electricity charges from individual members based on actual consumption, they are acting as intermediaries or pure agents. As per GST rules, transactions where the RWA acts as a pure agent are not considered as supplies for GST purposes unless they charge an additionnal amount over and above the actual cost incurred.
- Advance Maintenance Charges:
Issue: The RWA collects advance maintenance charges from its members to streamline the collection process.
Ruling: The AAR ruled that:
- Time of Supply: The time of supply for services occurs at the time when the RWA receives the advance payment from its members.
- GST Reporting and Liability: As per GST regulations (Section 13 read with Section 31 of CGST Act), the RWA must report these advances in their GSTR-1 and GSTR-3B for the relevant tax period and discharge GST liability accordingly.
Elaboration: Advance payments received by the RWA are considered as the time of supply under GST rules. This means that GST reporting and payment obligations arise when the RWA receives these advances, regardless of when the actual services (maintenance) are provided. The RWA must ensure compliance by reporting these advances correctly in their GST returns and paying the applicable GST amount.
- Taxability of Contributions Exceeding Rs. 7,500:
Issue: The RWA member contributions exceeding Rs. 7,500 per month per member.
Ruling: The AAR clarified that:
- GST Applicability: Contributions made by members to the RWA exceeding Rs. 7,500 per month per member are liable to GST at the rate of 18%.
- Condition: This liability arises when the RWA’s aggregate turnover exceeds Rs. 20 lakhs in a financial year and the contribution per member exceeds Rs. 7,500 per month.
Elaboration: According to GST regulations, RWAs are exempt from GST on contributions from members up to Rs. 7,500 per month per member. However, if this threshold is exceeded, the entire amount of contribution becomes taxable at 18% GST. The ruling ensures clarity on when GST liability applies to member contributions, helping RWAs comply with GST laws effectively.
These rulings provide clear guidance on the GST implications for RWAs like NCC Urban One Apartment Owners Mutually Aided Co-Op. Society Ltd., ensuring compliance with GST regulations in the collection and reporting of charges and contributions from their members.
Relevant Sections : 11,13,31 of CGST Act.
