GST update on RWA liable to pay GST only on the amount exceeding Rs.7500 : Madras High CourtGST update on RWA liable to pay GST only on the amount exceeding Rs.7500 : Madras High Court

GST update on RWA liable to pay GST only on the amount exceeding Rs.7500 : Madras High Court

The issue pertains to M/s TVH Lumbini Square Owners Association, Chennai approaching the Court against the decision of State GST authority. The AAR had earlier held that GST is payable on the entire monthly amount paid by member to its society. The exemption of Rs. 7500/- per month per member will not be applicable if the amount taken by RWA from its members exceeds Rs. 7500/- per month. This implies that GST will be payable on entire amount if it exceeds Rs. 7500/- per month per member. High Court in its verdict has overturned AAR ruling and a subsequent finance ministry circular. It held that the GST will be payable only on amount exceeding Rs. 7500/- per member per month.
We will be discussing this point in our today’s update. To understand this issue, let us first discuss the provisions of GST Act. Serial number 77 of notification number 12/2017-CT dated 28.06.2017 reads as follows:-

*S.No.*	*Chapter, Section, Heading , Group or service code*	*Description of Services*	*Rate*	*Condition*
1	……..
77	Heading 9995	Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution (a) as a trade union; (b) for the provision of carrying out any activity which is exempt from the levy of Goods and service Tax; or (c) up to an amount of Rs.7,500 per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex	Nil	Nil

Earlier Flyer issued by CBIC also said in favour of taxpayers but later on above AAR ruling on 21.6.2019 held that the GST is payable on entire amount. CBIC has also issued circular number 109/28/2019-GST dated 22.7.2019 confirming the view of AAR.
Meanwhile, another Karnataka AAR in case of M/s Prestige South Ridge Apartment Owner’s Association has also taken the same view.
However, appellant knocked the doors of Madras High Court against the aforesaid ruling. It was argued by the petitioner that at the time of introduction of GST, the CBIC issued a flyer clarifying that GST is payable only on the amount in excess. All RWAs followed the same but later they changed track and issued a circular to the contrary. But this circular is going against the simple language of notification.
High Court interpreted many notifications where exemption was denied and tax was payable on entire amount but held that there is no such language in impugned entry 77. On the contrary, the entry employs the word “upto”. This clearly connotes that exemption upto Rs. 7500/- per month per member is applicable in every case. “Upto” means till that amount. Hence, any amount till Rs. 7500/- is exempt and amount recovered over and above will be taxable. Hence, AAR ruling as well as circular of department is going against the entry in notification. Hence, these are set aside.
Now, there are two AAR rulings. One has been set aside by the Court whereas other is still binding on applicant. But the decision of High Court of a state is binding all over India if there is no contrary decision of other High Court. Although the basic principle of precedent is that decision of High Court is binding in jurisdictional territory. But there is no adverse decision of any other High Court then verdict of High Court is binding all over India. Following the same, even the advance ruling of Karnataka High Court will not be binding and High Court decision will prevail.

This is solely for educational purpose.
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GST update on RWA liable to pay GST only on the amount exceeding Rs.7500 : Madras High Court

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