The Tamil Nadu Authority of Advance Ruling (AAR) has ruled that the amount of corpus/sinking/capital fund collected from the residents for the purpose of painting and carrying out some building maintenance work in the common area of the apartment is subjected to CGST and SGST and applicable tax need to be paid.
The bench of B.Suseel Kumar and Balakrishna S. has observed that as the applicant liable to pay GST on the collection of corpus/sinking/ capital fund, they can utilize the ITC availed towards their outward liability subject to following the provisions of Section 17(2) of the Act and Rule 42 of the Rules.
The Applicant, Crimson Dawn Apartment Owners Welfare Association is a residents welfare Association formed by individuals/flat owners and is duly registered under the provisions of the Taminadu Societies Registrations Act, 1975 (TNSRA). Applicant performs its activities in accordance with its registered by-laws and also as per the TNSRA Act.
The applicant is having 120 members and engaged in providing maintenance & repairs of common areas of the apartments such as the corridors, garden, play area, pathway, clubhouse, swimming pool, gymnasium, electric equipment etc.
Based on the area occupied by the members, maintenance charges at a specified rate not exceeding Rs.7,500/- per month per apartment towards maintenance charges and this collection is done on quarterly basis.
The applicant collects ‘Corpus fund’ or ‘Sinking fund’ for specific purposes distinct from regular maintenance activities. This fund is intended to cover planned or unforeseen capital expenses in the future such as painting the exterior/common area, repairing/replacing major equipment like lifts and generators. This fund is maintained separately from regular maintenance charges and are designated for their specific purposes as outlined in the apartment’s by-laws.
The total amount expected to be collected from the members is Rs.2,00,00,000 for the intended purpose as mentioned above. As per the existing practice, the applicant account the collections as a liability in the balance sheet of the books of accounts of the association.
The applicant sought the advance ruling on the issue Whether the corpus /Sinking Fund collected from members liable to GST? If charged to GST, what is the rate of GST to be charged on the collection of Sinking fund? What is the SAC Code? If the corpus/Sinking fund collected from members liable to GST, whether the GST p a i d on such services (input service) b e set off against the GST payable on the amounts collected as corpus/sinking funds.
Yet another issue raised was once GST registration is taken, whether required to levy or collect GST on maintenance charges, provided that the monthly sum does not exceed Rs.7,500?
The AAR held that The applicant is providing partly taxable (liable to pay GST on the corpus/sinking/capital fund) and partly exempted supply of service (Nil rate of Tax for subscription per month per member is less than Rs.7,500/-). Therefore, the applicant is liable to restrict the claim of input tax credit to the extent of exempt turnover as per Rule 42 of the GST Rules.
Ruling Details
Applicant’s Name: M/S. Crimson Dawn Apartment Owners Welfare Association
Ruling Date: 07.05.2025
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