MH AAR: GST Levy on Receipt of Voluntary Charge from Members

The Maharashtra Authority of Advance Ruling (AAR) including T.R. Ramnani and Rajiv Magoo held that GST is subjected to pay on receipt of gratuitous payment from outgoing members.

The petitioner has a co-operative housing society registered under the Maharashtra Co-operative Housing Society Act (MCHS Act) holding 48 flats that impose its member’s maintenance charges according to the flat for the maintenance of the location.

An outgoing member makes a payment such as voluntary and gratuitous to the society when transferring a flat. There is no impact on the outgoing formalities to be finished under the MCHS Act. The petitioner mentioned that the contribution made is completely voluntary, also it does not the consideration obtained in place of services given by the applicant.

The petitioner collected the funds via its members for the repair and renovation of the location. The funds would not be utilized. The amount would be used once the petitioner finalizes the bids obtained for the repairs to be done.

The petitioner seeks an advance ruling on the problem of whether the receipt of a gratuitous payment via an outgoing member for the duration he has lived in the society would be taxed beneath the CGST Act, 2017.

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The petitioner has submitted that during the flat transfer, the outgoing member makes a gratuitous payment to the petitioner society, which would not pose any impact on the outgoing formalities to be finished. The gratuitous contribution is voluntarily made by the outgoing member and does not at all a consideration obtained in lieu of services given by the petitioner, thus no GST would be applied to the amount.

AAR said the consideration of having any payment incurred in money since the payment furnished for the major repair funds of the society. The same was transparent that the payment was towards the encouragement of the goods or services supply or both, either through the recipient if he carries on to be the member or by any additional individual.

AAR entrusted the decision of the High court towards the case of f M/s MP Finance Group CC (In Liquidation) v. C SARS, where one essential legal proposition was elaborated. The same was held that the income obtained by the assessees via illegal gains shall be subjected to tax in the assessee’s hands. hence, the collection of charges via society may be no legal beneath some of the additional laws, since the same comes beneath the scope of supply and the additional components of the GST levy, it would be taxed.