Facts of the Case:
In this case, the applicant a Resident Welfare Association (RWA) collects various charges from its members for maintenance and common facilities such as water supply, electricity for common areas, and recreational facilities at the community centre. Apart from monthly maintenance charges, the association also collects a corpus fund from members to meet future capital expenditures like major repairs, painting, and infrastructure upgrades. Seeking clarity on GST liability, the applicant filed an advance ruling application under Section 97 of the Central Goods and Services Tax Act, 2017 before the Karnataka Authority for Advance Ruling.
Issue:
- Whether recovery of water charges from members on actual cost basis is liable to GST despite water being generally exempt.
- Whether electricity charges for common areas recovered from members are liable to GST.
- Whether collection of corpus fund from members for future capital expenditure constitutes a “supply” under GST and the applicable time of supply.
- Whether monthly charges for upkeep of the community centre qualify as maintenance charges eligible for the ₹7,500 exemption available to RWAs.
Held that:
The Authority ruled as under –
A. Recovery of Water Charges
The Authority held that the association isnot supplying water as goods to its members. Instead, the recovery of water charges forms part of the overall maintenance services provided by the RWA. Under Section 7 of the CGST Act, the activities between an association and its members are deemed supplies. Therefore, water charges recovered from members, even if billed separately, are part of the maintenance services provided by the association. Such charges are taxable only if the total monthly contribution per member exceeds the exemption limit provided under Notification No. 12/2017–Central Tax (Rate).
B. Recovery of Electricity Charges for Common Areas
The Authority observed that electricity used in common areas (such as lifts, pumps, lighting, etc.) is consumed by the association for maintaining the residential complex. Although electrical energy itself is exempt under Notification No. 02/2017–Central Tax (Rate), the association is not supplying electricity to members but is providing maintenance services. Further, the association cannot claim the pure agent exclusion under Rule 33 of the CGST Rules, 2017, because Electricity bills are issued in the name of the association, Electricity is used in providing maintenance services and the association is not paying electricity charges on behalf of members.
Therefore, electricity charges recovered from members form part of the value of maintenance services and are taxable subject to the ₹7,500 exemption threshold.
C. Corpus Fund Contributions
The Authority held that contributions to the corpus fund are not deposits but advances for future services. Since the association and its members are treated as distinct persons under GST, members contribute money for services such as repairs, infrastructure improvements, and capital works, the collection qualifies as consideration for supply under Section 7 of the CGST Act. Therefore, corpus fund contributions constitute advance consideration for future services. Regarding the time of supply, the Authority relied on Section 13 of the Central Goods and Services Tax Act, 2017, which provides that the time of supply for services is the earlier of the date of invoice or receipt of payment.
D. Community Centre Maintenance Charges
The Authority held that these services form part of “Home Owners Association services” classified under Service Code 999598 (Services of Membership Organisations). Therefore, the charges collected for the upkeep of the community centre are treated as maintenance charges. Accordingly, such charges qualify for the exemption under Notification No. 12/2017–Central Tax (Rate), which exempts maintenance charges collected by RWAs up to ₹7,500 per member per month.
Case Name: In Re: M/s SANDEEP VIHAR OWNERS ASSOCIATION (M/s SOVA) dated 11.02.2026
To read the complete judgement 2026 Taxo.online 576
