Centre appeals against ruling on levy of GST on maintenance charges to resident welfare associations
The Centre has preferred a writ appeal before the Madras High Court against a single judge’s order that flat or villa owners paying more than Rs7,500 a month towards maintenance charges to their residents’ welfare associations must pay Goods and Services Tax (GST) at the rate of 18% only for the amount exceeding Rs7,500 and not for the entire monthly contribution.
Justices T.S. Sivagnanam and Sathi Kumar Sukumara Kurup on Wednesday allowed an application filed by the Centre to dispense with production of a certified copy of the judgment passed by Justice Anita Sumanth recently and directed the Registry to list the appeal for admission in the usual course.
Justice Sumanth had in July this year quashed an order passed by the Authority for Advance Ruling (AAR) on June 21, 2019 as well as a consequent circular issued by the Department of Revenue under the Union Finance Ministry on July 22, 2019 since both of them had insisted upon collecting GST for entire monthly contribution.
The judge disagreed with the view taken by the AAR as well as the Centre. She pointed out that the usage of the term ‘up to’ in two notifications issued by the Centre in 2017 and 2018, under the provisions of the CGST Act of 2017, would make it clear that GST could not be levied for contributions up to Rs7,500.
The verdict was passed while disposing of a batch of writ petitions filed by Greenwood Owners Association and Oceanic Owners Association from the House of Hiranandani in Egattur, TVH Lumbini Square Owners Association in Purasawalkam and an individual owner Sanjay Kumar Gupta from Mylapore here.
Justice Sumanth pointed out that GST came into effect from July 1, 2017 and a couple of days earlier, the Centre had clarified through a notification that members of a housing society or a residential complex would be exempted from payment of GST if the individual contribution was up to Rs5,000 a month.
Subsequently, the quantum entitled to exemption was raised to Rs7,500 by way of an amendment made on January 25, 2018. Since then, the resident welfare associations that were collecting more than Rs7,500 a month from its members began paying GST only for the differential amount over and above the exempted amount.
However, in 2019, TVH Lumbini Square Owners Association moved the AAR seeking a clarification in that regard and it led to a ruling by the authority that tax should be paid for the entire amount if the collection exceeds Rs7,500 a month. Taking inspiration from the ruling, the Centre too issued a similar circular and hence the present batch of cases.
Opposing the writ petitions, senior standing counsel R. Hemalatha, representing the Principal Chief Commissioner of GST and Central Excise, contended that the exemption was intended for middle class families residing in modest residential complexes and not for those owning luxurious flats and villas.
Therefore, only those paying less than Rs7,500 a month could be granted exemption and all those who contribute more must pay GST at the rate of 18% for the entire contribution made by them, she stressed. Not in agreement with her, the judge said a reading of the notifications issued by the Centre do not support her argument.
Referring to the exemption from GST granted to artists who charge less than Rs1.5 lakh per performance, the judge pointed out that the wordings of that exemption provision was completely different, and they make it clear that an artist would not be entitled to any exemption at all if he/she charges even Rs1 more than Rs1.5 lakh.
On the other hand, the exemption provision related to resident welfare associations “uses the term ‘up to’ which hardly needs to be defined and connotes an upper limit. It is interchangeable with the term ‘till’ and means that any amount till the ceiling of Rs7,500 would be exempt for the purposes of GST,” the judge had concluded.
