Greenwood Owners Association VS Union of India

The case involves multiple petitioners, primarily Resident Welfare Associations (RWA) residing in apartment complexes, with one individual petitioner who is a resident in an apartment. The main issue at hand revolves around a dispute regarding taxation under the Goods and Services Tax Act, 2017 (GST Act), particularly concerning the contributions made by individuals to RWA.

One of the petitioners, represented in W.P.No.27100 of 2019, contests an order from the Authority for Advance Ruling (AAR) which imposed taxes on the entire contribution made by this petitioner to their RWA. Meanwhile, the other petitioners, represented in W.P.Nos.5518, 1555 of 2020, and 30004 of 2019, challenge Circular No.109/28/2019 issued on 22.07.2019, which addresses the same issue.

The crux of the matter lies in the period following 01.07.2017, when the GST Act was enacted, leading to an examination of various services subject to GST. Notably, exemptions were granted under Notification 12/17-CT dated 28.06.2017. A relevant excerpt from the Circular regarding exemptions from Central Goods and Services Tax (CGST) on specific intra-state services is cited.

The Circular, issued under the authority of the Central Government and based on the recommendations of the Council, exempts intra-state supply of services as specified in the Table from excess central tax levied under sub-section (1) of section 9 of the GST Act, beyond the specified rates in the corresponding Table entry, unless further conditions apply.

This legal battle essentially revolves around the interpretation and application of GST laws, specifically regarding exemptions and taxation on contributions to RWAs post-GST implementation. Each petitioner is challenging either a specific tax order or a circular that impacts their tax liabilities or obligations concerning contributions made to RWAs. The resolution of this case has significant implications for both individual residents and RWAs residing in apartment complexes regarding their tax liabilities under the GST regime.

The petitioners in this case consist mainly of Resident Welfare Associations (RWA) representing apartment complexes, with one individual petitioner who resides in an apartment. Their challenge revolves around two key issues: firstly, a specific petitioner contests an order from the Authority for Advance Ruling (AAR) that imposed taxes on their entire contribution to the RWA. Secondly, other petitioners challenge Circular No.109/28/2019 dated 22.07.2019, which pertains to the same taxation issue.

The period of concern in this case is post-01.07.2017, coinciding with the implementation of the Goods and Services Tax Act, 2017 (GST Act). With the introduction of GST, various services became subject to taxation. However, exemptions were provided under Notification 12/17-CT dated 28.06.2017. This notification granted an exemption for contributions made to RWAs up to Rs. 7,500 per month per member for procuring goods and services from a third party for the common use of RWA members in housing or residential complexes.

The contentious point arises when contributions solicited from RWA members exceed the Rs. 7,500 limit. In such cases, the question of whether the excess amount is subject to taxation under GST regulations becomes crucial.

The petitioners argue that the entirety of their contributions should not be subjected to taxation, citing the exemption provided under Notification 12/17-CT. They contend that the contributions made to RWAs are for collective benefits and do not constitute a supply of services. Therefore, they argue that such contributions should be exempt from GST, at least up to the prescribed limit.

The AAR’s decision to levy tax on the entire contribution and the issuance of Circular No.109/28/2019 have raised concerns among the petitioners regarding the interpretation and application of GST regulations concerning RWA contributions.

The outcome of this case has broader implications for RWAs and their members across various residential complexes. It not only addresses the specific tax liabilities of RWA contributions but also clarifies the scope and applicability of GST regulations in similar scenarios.

Ultimately, the court’s decision will determine the tax treatment of RWA contributions exceeding the prescribed limit and provide clarity on the interpretation of relevant GST provisions, impacting the financial obligations of RWA members and the functioning of residential communities nationwide.

The case revolves around several Resident Welfare Associations (RWA) in apartment complexes, along with one individual resident in an apartment. One petitioner challenges an order from the Authority for Advance Ruling (AAR) that imposed tax on the entire contribution made to an RWA by the petitioner. Other petitioners contest Circular No.109/28/2019, issued on 22.07.2019, which addresses the same taxation issue.

The period under scrutiny begins post 01.07.2017, when the Goods and Services Tax Act, 2017 (GST Act) was enacted. With the implementation of GST, various services became subject to taxation, although exemptions were provided under Notification 12/17-CT dated 28.06.2017. This notification exempted contributions to RWAs up to Rs. 7,500 per month per member for sourcing goods and services from third parties for common use in housing complexes. However, questions arose when contributions exceeded this threshold: would the entire contribution become liable to GST, or would only the excess amount above Rs. 7,500 be taxed?

Initially, the Goods and Services Tax Department clarified that GST would apply only to the amount exceeding Rs. 7,500 for Co-operative Housing Societies, which essentially include RWAs, Housing Societies, or Societies in residential complexes. Consequently, RWAs consistently followed this method from 2017 to 2019 in collecting contributions and levying GST.

However, in 2019, one petitioner sought clarification from the AAR on this matter. The AAR, through an order dated 21.06.2019, ruled unfavorably, stating that the exemption was conditional upon contributions being Rs. 7,500 or less. If contributions exceeded this amount, the exemption would not apply, and the entire contribution would be subject to GST.

This legal dispute underscores the interpretation of GST laws concerning contributions to RWAs and the applicability of exemptions. The petitioners challenge the AAR’s ruling and the circular, seeking clarity and possibly a different interpretation that aligns with the methodology followed by RWAs until 2019.

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