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GST only on Monthly Maintenance Over Rs. 7,500: Madras HC

In a relief to resident welfare association (RWA) members across middle and high-end housing societies, the Madras High Court has ruled that the goods and services tax (GST) is applicable to monthly maintenance amount exceeding Rs. 7,500 only and not on the full amount.

The decision overturns a 2019 circular issued by the Central Board of Indirect Taxes and customs, which said exemption shall be granted only if the charges are limited to Rs. 7,500 per month and that full amount will be taxed beyond that.

The high court also quashed an Authority of Advance Ruling (AAR) order of 2019, which said that an exemption was permissible only if the contribution was up to Rs. 7,500. In case the contribution was more than Rs. 7,500, then exemption would not be valid and the full amount would have to be taxed, it said.

“The discussion as above leaves me no doubt that the conclusion of the AAR as well as the circular to the effect that any contribution above Rs. 7,500 would disentitle the RWA to exemption, is contrary to the express language of the entry in question and both stand quashed,” Justice Anita Sumanth said in the July1 order a copy of which has been seen by ET. “To clarify, it is only contributions to RWA in excess of Rs. 7,500 that would be taxable under GST Act.”

“In case of big RWAs, especially in tier-1 cities, every household could save up to Rs. 1,350 per month if the executive board of RWA takes a tax position based on this Madras High Court ruling,” said Rajat Mohan, senior partner at AMRG Associates.

However, he cautioned that the tax position is likely to have two risks- the department may challenge the order in a higher legal forum and tax officers in other states may deny the interpretation of the Madras High Court. S-ET

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