The Madras High Court has recently ruled GST is applicable only to monthly maintenance amount exceeding Rs. 7,500 per month per member collected by Residential Welfare Association (RWA) – not on the full amount.
The Court was hearing petition filed by three RWAs challenging an order of the AAR levying tax on the entirety of the contribution to RWA and a circular dated July 22, 2018, and issued by the Finance Ministry amending the methodology to levy GST on contribution to RWA.
The Single Judge bench of Justice Anita Sumanth stated that there is no ambiguity in the language of the exemption provision in this case and thus the judgment of the Supreme Court in Dilip Kumar would not be applicable to the facts and circumstances of this case. The ratio of that decision would apply only in a case where the provisions granting exemptions are ambiguous, whereas, in the present case, the Entry, in my view, is clear and hence it is only a question of interpreting the same.
Further the Court held, “The intention of the Circular appears clear, that is, to grant exemption in regard to the receipts from services that answer to the description set out therein. The description of the services is also clear, that is, services to the members of an unincorporated body or non-profit by way of reimbursement of charges or share of contribution upto an amount of Rs.7,500/- in the sourcing of goods or services from a third person for the common use of its members. No ambiguity presents itself on a plain reading of the Entry and the intention is clear, so as to remove from the purview of taxation contribution upto an amount of Rs. 7,500/-.”
The Court also noted that the prescription of a slab connotes that income upto that slab would stand outside the purview of tax on exigible to a lower rate of tax and income above that slab would be treated differently. The intendment of the exemption Entry in question is simply to exempt contributions till a certain specified limit. The clarification by the GST Department even as early as in 2017 has taken the correct view.