In a recent ruling, The Tamil Nadu Authority for Advance Ruling (TNAAR) has clarified that if the monthly maintenance amount gathered by the registered housing society or resident welfare committee surpasses INR 7500 per month, then a flat 18% GST rate will be applicable on the entire amount, not the different amount. The ruling decision has come from TNAAR recently as a clarification against one of the queries put in TVH Lumbini Square Owners Association, Purasawalkam in the court.
The ruling decision has come from TNAAR recently as a clarification against one of the queries put in TVH Lumbini Square Owners Association, Purasawalkam in the court.
In the case of the TVH Lumbini Squares, the housing society welfare association has mentioned that it is registered under the GST Act, the Societies Act, and also are Income Tax assessees.
Total 9 residential blocks and 448 flats are part of the society as discussed by the TVH welfare committee. The welfare group charges a maintenance fee of ₹3.50 per square feet per month every quarter along with GST.
In the earlier cases, a flat 18% GST rate was applicable on the maintenance amount exceeding INR 5000, which has been revised to INR 7500 w.e.f. 25th January 2019.
To seek clarification on GST, the TVH welfare committee has enquired TNAAR about whether the resident has to pay GST on the value about INR 7500 or on the entire amount. For instance, if the gathered maintenance amount is INR 8000, then the GST would be applicable on the exceeding amount, i.e., INR 500 or the entire amount of INR 8000? Does the GST liability get applicable on the value or above INR 7500 or the entire amount?
Shock for Tax Experts
However, the ruling given by TNAAR in the given case has surprised many of the tax pundits.
One of the advocates and partner at Swamy Associates said that the ruling is contrary to the Flier, i.e., “GST on Co-operative Housing Societies” that has been distributed by Central Board of Indirect Taxes (CBIC) concerning the applicability of GST rates against maintenance charges.
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According to the tax advocate, the Flier includes details as quoted here “Further, the question arises if the monthly bill is say ₹6,000, will GST be applicable on ₹6,000 or ₹1,000 (at that time the exemption limit was ₹5,000 which was later enhanced to ₹7,500). In such cases, the exemption is available up to an amount of ₹5,000 and GST would be applicable on the amount in excess of ₹5,000.”
Instructions Violation by AAR
AAR in Tamil Nadu has ignored the instructions given in the CBIC Flier that was brought into notice by the authority itself. Such brazen violation of CBIC rules by AAR is certainly a question mark over their credibility and ruling mechanism in the long run, as discussed by the tax advocate at Swami Associates.
