GST Payable on Corpus Fund at Time of Collection; Electricity Charges for Common Areas Taxable as Part of Maintenance Services: AAR

The Karnataka Bench of Authority for Advance Ruling Karnataka (AAR) has held that Goods and Services Tax (GST) is payable on corpus fund contributions at the time of collection and not at the time of actual utilization. The bench of Kalyanam Rajesh Rama Rao and Sivakumar S Itagi has ruled that resident welfare associations (RWAs) provide services that fall under “services of membership organisations,” and such activities may be exempt only to the extent specified in the exemption notification applicable to residential societies. Under Entry 77 of Notification No. 12/2017-Central Tax (Rate), contributions collected by an RWA from its members are exempt only up to ₹7,500 per month per member for sourcing goods or services for common use. The ruling came in response to an application filed by Sandeep Vihar Owners Association, an apartment owners’ association responsible for managing a residential complex developed by the Army Welfare Housing Organisation in Bengaluru. The applicant, Sandeep Vihar Owners Association (SVOA), is a registered apartment owners’ association responsible for maintaining a residential complex that houses serving Indian Army personnel, veterans, war widows, and their families. The association manages common facilities such as security services, housekeeping, waste management, and the supply of utilities including water and electricity. To maintain these services, the association collects monthly maintenance charges from its members. It also recovers water charges and electricity charges separately on an actual-cost basis and collects a corpus fund from members to meet future contingencies and major repairs, such as structural repairs, painting, and infrastructure upgrades. Seeking clarity on GST implications, the association approached the AAR with multiple questions regarding the taxability of these recoveries from members. The association argued that water supplied to members should be exempt from GST since water (other than mineral, aerated, or packaged water) is exempt under Notification No. 02/2017-Central Tax (Rate). The AAR acknowledged that water itself is an exempt supply. However, it observed that an association and its members are treated as distinct persons under Section 7 of the CGST Act. Therefore, the activities performed by the association for its members—including providing services and utilities—constitute a supply. Another key issue before the AAR was whether electricity charges recovered from members for common areas could be excluded from GST on the basis that the association acts as a “pure agent.” The association contended that electricity is exempt from GST and that the charges are merely collected from members on an actual basis without markup. However, the AAR rejected this argument. The authority observed that electricity bills are issued in the name of the association and the electricity is used for maintaining common facilities such as lifts, lighting, pumps, and security systems. Since the electricity is consumed by the association itself in the course of providing maintenance services, it cannot be considered as procured on behalf of members as a pure agent. Consequently, the AAR held that electricity charges form part of the consideration for maintenance services provided by the association and are therefore includible in the value of supply for GST purposes. The most significant issue in the ruling related to the corpus fund collected from members. The association argued that corpus contributions are akin to deposits or capital contributions meant for future contingencies and therefore should not be subject to GST. However, the AAR rejected this interpretation. It distinguished between a “deposit” and an “advance,” stating that corpus funds collected upfront for future repairs and infrastructure improvements are essentially payments received in advance for future services. The authority explained that under Section 13 of the CGST Act, which governs the time of supply of services, GST becomes payable at the earlier of the date of invoice or the date of receipt of payment. Since the corpus fund is collected before the services related to repairs or improvements are actually rendered, the receipt of such payment triggers the time of supply. Therefore, the AAR concluded that GST is payable at the time the corpus fund is collected from members, rather than when the funds are eventually used for repairs or maintenance. Ruling Details Applicant’s Name: Sandeep Vihar Owners Association Citation: JURISHOUR-397-AAR-2026(KAR) Ruling Date: 11.02.2026 Click Here To Read Ruling Read More: Corpus Fund Collected by Apartment Owners’ Association Is ‘Supply’, GST Payable at Time of Collection; Rs. 7,500 Monthly Exemption Not Applicable: AAR

GST Payable on Corpus Fund at Time of Collection; Electricity Charges for Common Areas Taxable as Part of Maintenance Services: AAR

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