GST sobre las contribuciones de los miembros de la RWA | Exención disponible hasta 7500 INR

Held by Hon’ble High Court of Madras in matter of 

Greenwood Owners Association v. Union of India [W.P. Nos. 5518 and 1555 of 2020 dated July 01, 2021]. 

Post implementation of GST, vide Entry 77 of the Notification No. 12/2017-CT dated June 28, 2017, exemption was granted with respect to  contribution received by RWAs in excess of INR 7,500. As per fliers and clarifications issued by CBIC initially, it was clarified that GST would be applicable on consideration received in excess of INR 7,500. 

However, later on an RWA filed an application before the Authority of Advance Ruling to seek clarification in this matter. Hon’ble AAR held adverse and stated that exemption is available only if contribution is received upto INR 7,500. Therefore, If the contribution amount exceeds INR 7,500 then the entire contribution will be liable to GST. Inspired by such ruling, CBIC issued a clarification vide  Circular No.109/28/2019-GST dated 22nd July, 2019 stating that exemption of contribution will be available only if amount is received upto INR 7,500. If an excess amount is received then the entire contribution would be liable to GST. Therefore, petitioner filed writ Petitioner before Hon’ble High Court challenging validity of Ruling of AAR and Circular later on issued by CBIC.

Hon’ble High Court held that the plain words employed in Entry 77 being, ‘upto’ an amount of Rs.7,500/- can only be interpreted to state that any contribution in excess of the same would be liable to tax. The term ‘upto’ connotes an upper limit and the same is interchangeable with the term ‘till’. It means any amount till the ceiling of Rs.7,500/- would be exempt for the purposes of GST. Therefore, The clarification by the GST Department even as early as in 2017 has taken the correct view. 

1. Brief facts of the Case

1. Petition is filed by Resident welfare Associations against an Advance Ruling which held that GST is levilable on the entire contribution received by RWA.
2. Post introduction of GST, exemption was granted on contribution made by the members of RWA vide Notification 12/17- CT dated 28.06.2017 wherein exemption was granted for contribution made upto INR 5,000 per month per member. Limit of INR 5,000 was amended upto INR 7,500 vide Notification No.2/18 dated 25.01.2018.
3. Exemption was granted for contributions made to RWA upto an INR.7,500/- per month per member for sourcing of goods and services from a third person for the common use of the members of RWA, i.e., housing complexes or residential complexes.
4. In many cases, RWA received contributions in excess of INR 7,500. In such situation, question arose that:
   • Whether in case contribution exceeds INR 7,500, the RWA would loose benefit of exemption altogether, i.e., entire contribution of INR 7,500 would be taxable; or
5. Exemption will continue till contribution of INR 7,500 and only amount received in excess of INR 7,500 would be taxable.
6. In Initial period, GST Department issued clarification in case of Co-operative Housing Society wherein it was specifically mentioned that GST would be applicable on consideration received in excess of INR 7,500. Fliers covered all Co-operative Housing Societies, in essence, RWAs, Housing Societies or Societies in residential complexes.
7. Therefore, considering the clarification, all RWAs were levying GST on contributions received accordingly.
8. However, in 2009, one of the petitioners approached the Authority of advance ruling seeking clarification on this matter.
9. Hon’ble AAR held adverse and stated that exemption is available only if contribution is received upto INR 7,500. If contribution amount exceeds INR 7,500 then entitlement of exemption would stand defeated and entire contribution will be liable to GST.
10. Inspired by ruling of Hon’ble AAR, CBIC issued a circular vide Circular No.109/28/2019-GST dated 22nd July, 2019 wherein it also clarified that exemption of contribution will be available only if amount is received upto INR 7,500. If excess amount is received then entire contribution would be liable to GST.
11. Aggrieved by circular of CBIC and ruling of AAR, petitioner filed the writ petition (W.P.No.27100 of 2019) before the Hon’ble High Court of Madras. The petitioners challenged Circular No.109/28/2019 dated 22.07.2019 on the issue of levying tax on the entire amount of contribution received by RWA.

2. Relevant Legal Extracts

1. “Description of Service” under Entry No. 77 of Notification No. 12/2017- CT dated 28.06.2017 is reiterated below:

“Service by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution- 

(a) as a trade union; 

(b) for the provision of carrying out any activity which is exempt from the levy of Goods and Service tax; or 

(c) up to an amount of Seven thousand Five Hundred rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex.”

2. Relevant extract of circular later issued by department (Circular No.109/28/2019-GST dated 22nd July, 2019) is reiterated below:

3. Argumentos del demandante

The petitioner contended that:

1. Interpretation by the Department is contrary to the express language and intend of the exemption granted. 
2. Emphasis is placed on the phrase ‘upto’.  Exemption is granted for contribution received upto Rs.7,500/- and this entitlement remains constant irrespective of change in amount of contribution.
3. Also, as per Article 13(3) of the Constitution of India, withdrawal of any statutory exemption by way of circular is contrary to the provisions of the constitution.
4. Further, based on the initial clarification of the Department itself, the petitioner RWAs collected GST only on that contribution that exceeds Rs.7,500/-. Now if a contrary view is taken at this juncture then it would be impossible for the RWAs to collect the shortfall as there would have been several changes in ownership of the property, in the interim.

4. Alegaciones del recurrido

Ld. Counsel of the Respondent contended that:

1. Stress was placed on Section 15 of CGST Act, as per which, GST is leviable on transaction value. In the given case, transaction value is contribution received and it should entirely be taken into account for levying taxes.
2. Also, exemption is meant for middle classes and not for luxury appartments /their owners.
3. Also, in the exemption notification, no slabs are given. Rather only a range is given which entitles assessee for exemption. Any variation in amount would automatically disentitled the benefit.
4. Also, respondent place reliance on ruling of apex court in the matter of Commissioner of Customs Import, Mumbai V. Dilip Kumar & Company (361 ELT 577) wherein it was held that in the case of ambiguity in interpretation of a tax exemption provision or Notification, interpretation should be strict and the burden of proving applicability would fall on the assessee. Therefore, in this case, the exemption provision must be construed strictly and the petitioners are thus not entitled to seek beneficial treatment. 

5. Analysis of Hon’ble High Court of Madras

 Hon’ble High Court of Madras made following analysis:

1. In the given cases, there is no ambiguity in the language of the exemption provision. Therefore, judgment of the Supreme Court in Dilip Kumar (supra) would not to this case.
2. Intention of exemption notification is clear that it wants to remove contribution from the purview of taxation upto an amount of Rs.7,500/-.
3. If a comparison is carried out of this exemption with language of other exemptions then it clearly appears the difference in language adopted by the revenue in the matter of grant of exemptions. 
4. In a case where legislature intended that the exemption shall apply only to cases where the amount charged does not exceed a specified pecuniary limit, it states as much, as can be seen from the language deployed in the proviso to Clause 56 in Notification 25 of 2012 where it is stated ‘the exemption shall apply only where the gross amount charged for such service does not exceed Rs.5,000/- in a financial year’.
5. Similarly in entry No. 78 of Notification No.12/2017 dated 28.06.2017, exemption is available to following:

“Services by an artist by way of a performance in folk or classical art forms of- 

(a) music, or 

(b) danza, o

(c) teatro,

si la contraprestación cobrada por dicha actuación no supera las ciento cincuenta mil rupias:

Siempre que la exención no sea aplicable a los servicios prestados por dicho artista en calidad de embajador de marca..”

6. El término «artista» se clasifica según sus ingresos. Aquellos que cobran menos de 150 000 INR están exentos. Si la contraprestación supera los 150 000 INR, aunque sea por una rupia, el artista perdería el beneficio de la exención.
7. Estas entradas figuran en la misma notificación de exención, por lo que la elección de las palabras empleadas es deliberada y pretende tener aplicaciones distintas.
8. Según el Tribunal Supremo en el caso Dilip Kumar (supra), el Tribunal reitera la norma establecida de que una notificación de exención debe interpretarse estrictamente. Las palabras llanas empleadas en la entrada 77, al decir «hasta» un importe de 7500 INR, solo pueden interpretarse en el sentido de que cualquier contribución que exceda dicha cantidad estará sujeta a impuestos.
9. El término «hasta» denota un límite superior y es intercambiable con el término «hasta el». Significa que cualquier importe hasta el tope de 7500 INR estaría exento a efectos del GST.
10. En cuanto al argumento sobre el tipo impositivo por tramos, un tramo es una medida para determinar la responsabilidad fiscal. La prescripción de un tramo implica que los ingresos hasta dicho tramo quedarían fuera del ámbito de aplicación del impuesto o estarían sujetos a un tipo impositivo inferior, y los ingresos superiores a dicho tramo recibirían un tratamiento distinto. La intención de la entrada de exención en cuestión es simplemente eximir las contribuciones hasta un límite determinado.
11. Por lo tanto, la aclaración del Departamento de GST, ya desde 2017, ha adoptado el criterio correcto.

6. Decisión del Honorable Tribunal Superior de Madrás

El Honorable Tribunal Superior dictaminó que la aclaración del Departamento de GST en 2017 era correcta. La sentencia dictada por la AAR y la posterior circular del CBDT deben ser anuladas. Por lo tanto, no se aplica el GST a las contribuciones recibidas hasta 7500 INR y, en caso de contribuciones superiores a 7500 INR, el GST solo se aplicará sobre el importe adicional.