GST Update on Admissibility of ITC to Residential Housing Society

It is very common now-a-days to form Residential Housing Society (RHS) who collects certain charges from the prospective buyers of the flat for providing various common amenities such as carrying out repairs and renovation activities such as repair and maintenance of lifts, property taxes, water charges, common electricity charges, car parking charges etc. The question that was recently raised before the Maharashtra Authority for Advance Ruling was that whether input tax credit will be admissible to the RHS on the services of repair and renovation availed from contractor for providing the same to the prospective flat buyers in the case of M/S MAHAVIR NAGAR SHIV SRUSHTI CO-OPERATIVE HOUSING SOCIETY LIMITED. The outcome of this decision is the subject matter of discussion of our present update. The applicant contended that the contract given for repairs, renovations and rehabilitation of the building which is an immovable property may come under ‘works contract services’ and they will be entitled for the ITC as the applicant is further providing the said services to its members which is deemed to be a supply. It was pleaded that the applicant has stepped into the shoes of the main contractor for providing the said works contract services to its members. It was also contended that as far as GST is being levied on the services provided by applicant to its members, they are eligible for availing the ITC. The AAR held that a housing society is a collective body of persons, who stay in a residential society and the collective body supplies certain services to its members like collecting statutory dues to be remitted to statutory authorities, or maintenance of the building etc. As per section 2(17)(e) of the CGST Act, 2017, provision by a club, association, society, or any such body (for a subscription or any other consideration) or the facilities or benefits to its members is deemed to be a business. Thus, RHS may be seen to be providing club and association services to its members but does not provide works contract service to its members. Consequently, it was held that the applicant is debarred from taking ITC under the provisions of section 17(5)(c) of the CGST Act, 2017. The above decision seeks to bifurcate the ITC under the works contract services to be different from the other categories of credit wherein the credit is disallowed if the same is not used in further provision of works contract services. This will result into flood of litigation as the RHS collects charges for various amenities and if the input tax credit of works contract services availed by RHS is denied, it will defeat the very purpose of GST regime and will lead to cascading effect of taxes.

Comments

GST Update on Admissibility of ITC to Residential Housing Society

Post a Comment

Query