Monalisa Co-Operative Housing Society Limited

The receipt of a gratuitous payment from an outgoing member for the time he has resided in the society be taxable under the CGST Act, 2017. 

The said contribution by the outgoing member is nothing but Advance amounts paid to the society for services carried out or to be carried out for the members of the Society and is therefore taxable as per the GST Laws.

3.1 M/s Monalisa Co-operative Housing Society Ltd (the ‘Appellant’) is a co-operative housing8 society registered under the Maharashtra Co-operative Housing Society Act (MCHS Act) having 48 Flats which provides services to its members and charges GST on maintenance charges recovered from its Members. 

3.2 Appellant has submitted that when there is a transfer of a flat, the outgoing member makes a gratuitous & voluntary payment to the society. The same does not have any implications on outgoing formalities to be completed as per MCHS Act. The Appellant stated that the above contribution made is entirely voluntary and is not at all a consideration received in lieu of services provided by the Appellant.

3.3 The Appellant is also collecting funds from its members for future major repairs and renovation of the premises. Such funds have no immediate utilization purpose. The amount will only be utilized once the Appellant finalizes on the bids received for the repairs to be carried out. 

3.4 The appellant referred to the provisions of Sec 7 and Sec 2 (84) of the CGST Act, 2017, decision of the Hon’ble Supreme Court of India, in the Case of Calcutta Club Limited v State of West Bengal vide C.A. No. 4184 of 2009, decision of the Hon’ble Jharkhand High Court in case of Ranchi Club Ltd v Chief Commissioner, decision of the Hon’ ble Gujarat High Court in the case of Sports Club of Gujarat Ltd v UOl and the decision of the Maharashtra AAAR Ruling for Rotary Club of Mumbai Nariman Point to support its contention that maintenance charges collected by the society are in the form of reimbursement collected for upkeep of the premises, where no benefit goes to the society & each & every expense is incurred from the maintenance charges collected by the society is to maintain the society premises. Similarly, the expenses incurred by the society are already subject to GST and charging tax on maintenance fees would amount to double taxation. 

3.5 Appellant submitted that as per Sec 7 of the CGST Act, 2017, supply should be made in the course of furtherance of business. A gratuitous payment by an outgoing member cannot be regarded as a consideration but rather in substance is a gift to the society as the member is paying on his own volition. The appellant further submitted that such payment cannot be treated

as consideration as there is no business transacted and the person acts on his own volition in its entirety O In view of the above factual position, the Appellant, for the purpose of seeking clarity regarding

3.6 the applicability of GST on the transactions under question had filed an application for the Advance Ruling before the MAAR. The questions asked by the Appellant in their Advance Ruling Application were as under: I. Whether the charges received by the applicant towards upkeep and maintenance from its members are covered umder Sec 7of the CGST Aci? 2 Whether the receipt of a gratuitous payment from an oulgoing member for the time he has resided in the society be taxable umder the CGST Act, 2017 as there is no corresponding service being provided separately by the tax payer society? 3. Whether major repairs to be made in the future for the co-operative housing society, for which amounts are collected, be taxable at all as it is for the members only? And if tarable, whether the same is taxable at the time of its collection or whether the same would be taxable on utilization of such fumds? However, Question No. 1 raised in the application was withdrawn by the appellant during the course of the Preliminary Hearing and Question No. 3 raised in the application was withdrawn by the appellant during the course of the Final Hearing and therefore, both the questions were not taken up for discussion by the MAAR.

3.7 The MAAR, vide Order No. GST- ARA-30/2020-2 1/B-71 dated 31.05.2022, held in respect of the Question No. 2 asked by the Appellant, as under: 3.7.1 MAAR discussed that whether the appellant society can legally collect the so called gratuitous and voluntary donation from a transferor of a flat in the society. MAAR therefore referred to the ‘Model Bye Laws of the Co-operative Housing Societies’ in Maharashtra. Bye Law No 38 is very relevant in the present case and is therefore reproduced as under:

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Monalisa Co-Operative Housing Society Limited

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