Criminal Trident Pack: IPC, CrPC and IEA by Sr. Adv. G.S Shukla and Adv. Raghav Arora
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Gaurav (Chief Engineer)     04 July 2016

Service tax on maintenance charge of rwa

We are residents of a group housing society in Faridabad,

In our case, the monthly maintenance charge is below rs 5000/- for each resident

Total annual collection is approx 2 crores.

Maintenance agency is collecting monthly maintenance charge and service tax is being applied.

If RWA starts collecting the monthly charges, is service tax applicable, even though the monthly contribution is below 5000/-. ( we are being told that if annual collection of RWA is more than 10 lakh, service tax is applicable. )

 



Learning

 12 Replies

JustAdvisor (IT)     04 July 2016

post this query on caclubindia.com it is on annual collection not on individual monthly contribution. but you need to check whether RWA's are liable in the first place.

balas (Chartered)     07 July 2016

Hi Mr. Gaurav,

Per your info, as you have > 10 Lacs PA , service tax is applicable and have been rightly pointed out.

On your query w.r.t to member contribution being < Rs 5000 Per member / Month, it is "Exempted from Service Tax". 

For detailed notification on exemption , please read the following circulars and your query is addressed :

Circular No.175 /01 /2014 - ST

Notification No. 25/2012-Service Tax

I am reproducing specific details from the above two :

Circular No.175 /01 /2014 - ST :

"

Exemption at Sl. No. 28 (c) in notification No. 25/2012-ST is provided specifically with reference to service provided by an unincorporated body or a non-profit entity registered under any law for the time being in force such as RWAs, to its own members.

 

However, a monetary ceiling has been prescribed for this exemption, calculated in the form of five thousand rupees per month per member contribution to the RWA, for sourcing of goods or services from third person for the common use of its members.

 

If per month per member contribution of any or some members of a RWA exceeds five thousand rupees, the entire contribution of such members whose per month contribution exceeds five thousand rupees would be ineligible for the exemption under the said notification. Service tax would then be leviable on the aggregate amount of monthly contribution of such members.

"

b.

Notification No. 25/2012-Service Tax

"

.....the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the following taxable services

28. 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 service tax; or

    (c)   up to an amount of five thousand rupees 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;

"

Hope the above helps.

 

Balaji Srini FCA., LL.B.

 

Gaurav (Chief Engineer)     07 July 2016

Thanks a lot for you time and guidance. I had gone through the said notifications and circulars. But being an engineer could not make sense of it. Hence requested help from experts. The said rules may be interpreted in two ways and i list both: 1 Service tax from each resident is applicable bcause annual collection is more than 10 lakhs. It means even residents paying less than 5k hv to pay service tax on their monthly contribution due to annual cap being in affect 2 residents contributing less than 5000 pm do not hv to pay service tax. Residents contributing more than 5000 pm hv to pay service tax if the total collection from more than 5000 pm houses collectively becomes more than 10 lakh per annum Would appreciate your help in clarifying this point. Thanks in advance Gaurav

balas (Chartered)     09 July 2016

Hi,

In reply to Mr  Gaurav,

Point 1 :  You cant charge service tax on members contributing <5K/M/Member as it is in violation of the service tax act / rules per the notification.

Point 2. : You are right. Members contributing > 5K/M/Member are chargeable to service tax provided total aggregate valiue of taxable services exceeds 10 Lac limit. For this purpose it only includes only taxable services > 5K/M/Member to be aggregated.

This does not include taxable services   exempt from whole of service tax leviable thereon under section 66B of the said Finance Act under any other notificationi.e. in this case, members contributing <5K/M/member are not to be included for aggregate value of turnover.

 

HOpe this clarifies.

Balaji Srini FCA., LL.B.

 

 

Gaurav (Chief Engineer)     09 July 2016

Thanks for your advice and time One more question cropped up on this topic. The society common electricity consumption is being added to the maintenance charge. We are being told by rwa that the payment of common electricity is not exempted as pure agent clause is only applicable on individual consumption. Pls let us know is there should be any service tax levied at any stage from collection from residents upto payment done to electricity distribution nigam Thanks i� advance

balas (Chartered)     11 July 2016

Hi,


Electricity supplies are not treated as service supply but goods supply and hence outside the perview of service tax.

Another point to note is  the elctricity company does not charge service tax, be it residential or common area supply (coz goods services), it is questionable that  RWA charges service tax on electricity supplies when no value added services are added  in electricity supply chain. S.Tax charged on electricity supplies can be challenged as it is in violation of service tax laws.

Balaji Srini FCA., LL.B.

Gaurav (Chief Engineer)     12 July 2016

Thanks a lot for your valuable time and efforts. The reason for my asking this question is sl no 3 of circular no 175/01/2014-ST. Which specifically mentions electricity consumed for common facilities like lifts, water pumps, lighting are not excluded from service tax. The RWA is insisting that as per this clause, service tax is applicable on common electricity. As per my understanding, the individual residents do not have to pay service tax on monthly maintenance bill. However since most of the facilities / services are outsourced to third party, the service providers will have to charge service tax from RWA. This implies we have to pay it indirectly. The only saving seems to be in electricity for common area. Service tax as per the circular seems applicable but whomever we consulted says is not applicable. Sorry for asking seemingly silly questions, but i wonder why a simple language could not be used in the circulars. Thanks again.

balas (Chartered)     15 July 2016

Hi,

Apologies for delay.

Your reference point on the circular is indeed correct. But this needs to be challenged and as said earlier no additional service are rendered in T & D by RWA to attract services and thereby service tax to be levied. Another point is there should be service provider and service receiver which is not the case when association is formed by members for its benefit.

In addition, you can please access the recent cases that has been decided by MUMBAI CESTAT. This gives relief to RWAs in regard to your issue.

MATUNGA GYMKHANA, TAHNEE HEIGHTS CO-OP HOU SOC LTD AND MITTAL TOWER PREMISES CO-OPERATIVE SOCIETY Versus COMMISSIONER OF SERVICE TAX, MUMBAI - 2015 (1) TMI 1146 - CESTAT MUMBAI

Link to public domain is :

https://timesofindia.indiatimes.com/city/mumbai/Mumbai-housing-societies-spared-service-tax/articleshow/45876822.cms

 

Hope the above are useful.

 

Balaji Srini FCA., LL.B.

 

 

vswaminathan   18 October 2016

https://lnkd.in/fTPHGiN

Posted comments @ the above,  are of direct relevance to the Previous Posts wrt the 'live' controversy and the ongoing discussions, in concerned quarters; that is, on the subject of levy of SERVICE TAX on collections by a 'RWA' from members, for common maintenance of their building complex.

Jagdev   25 July 2017

Dear CA Bajaj Srini,

Thank you very much for your reply which is very helpful!  This is Jagdev lives in a socitey in Fardabad. I am also facing the same issue.

All memebers of our socity are paying less than 5000 maintenance amount per month and the turnover of the socitey is around 1.5 cr every year. Now, RWA is not charging sevice tax to its members but when RWA is paying the amount to the maintenance agency they are paying the service tax as the amount is more 20Lac in a year. RWA can not take Cenvat credit as well as they are not receiving the sevice tax from its members. So ultimatly the same service tax amount is paid by the members to its RWA. My question is whether the maintenance agency hired by RWA for providing services to its residents is liable to receive the serivce tax? Or the sevices provided by the maintenance agency to RWA is exempted from service tax even if the turnover is 1.5 cr. as the serices they are providing to members is less than 5000 per month.

Would be great if you could clear this doubt.  Thank you very much in advance!

 

Best regards,

Jagdev, MCA

Jagdev   25 July 2017

Jagdev   25 July 2017


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