The Tamil Nadu Authority for Advance Ruling (AAR) has held that if the amount collected by a registered housing society/resident welfare association exceeds ₹7,500 per month per flat, Goods and Services Tax of 18% is payable on the entire amount and not on the difference amount.

The ruling came in response to clarification sought by TVH Lumbini Square Owners Association, Purasawalkam.

The association said it was registered under the societies Act, Goods and services tax Act and also Income Tax assessees.

The society consists of 9 residential blocks and there are 448 flats, it said.

It is currently collecting maintenance charges on quarterly basis at ₹3.50 per square feet per month along with applicable GST.

Earlier, the maintenance charges in excess of ₹5,000 attracted GST and the limit was revised in excess of ₹7,500 effective from January 25, 2018.

The association sought clarification as to whether a resident must pay GST on the value over and above ₹7,500 or on the entire amount. For example, if the maintenance charge is ₹8,000 for an individual resident, does GST liability arise on the value over and above ₹7,500 (on ₹500) or on the entire amount of ₹8,000? The AAR ruling is that the GST is applicable on the entire amount.

Tax experts surprised

However, the ruling has taken tax experts by surprise.

G. Natarajan, advocate and partner of Swamy Associates, pointed out that the ruling is contrary to the Flier “GST on Co-operative Housing Societies” issued by the Central Board of Indirect Taxes (CBIC).

To quote from the Flier: “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, exemption is available up to an amount of ₹5,000 and GST would be applicable on the amount in excess of ₹5,000”, he said.

Violation of instructions

“Though this Flier was brought to the notice of the AAR, the authority has chosen to ignore the same. Such brazen violation of the instructions issued even by the CBIC, by the Advance Ruling Authority would further erode the credibility of the mechanism of the Advance Ruling itself,” Mr. Natarajan said.