Residents associations are liable to pay GST only for amounts over Rs 7,500: Madras HC

CHENNAI: In a reprieve for resident welfare associations of apartments, the Madras High Court has ruled that the associations will be liable to pay Goods and Services Tax (GST) only for amounts received above Rs 7,500.

Observing that certain circulars issued by the Tamil Nadu Authority for Advance Ruling (AAR), the body that deals with GST issues, and the Central Board of Indirect Tax and Customs (CBIC), were contrary to the provisions issued by the Central Goods and Services Tax Act, and allowed a batch of pleas moved by several welfare associations.

The issue pertains to TVH Lumbini Square Owners Association, Chennai, approaching the court against the State GST authority that held that GST is payable on the entire monthly amount paid. The court then granted an interim stay.

In 2017, the Finance Ministry had clarified that GST would be applicable on the entire maintenance amount if it exceeds Rs 7,500 per month per person and only if the turnover of such residential associations exceeds Rs 20 lakh.

Advocate G Natarajan, appearing for TVH Lumbini Square Owners Association, argued before justice Anita Sumanth that at the time of introduction of GST, the Central Board of Indirect Tax and Customs issued a flyer clarifying that GST is payable only on amount in excess.  However, after a few months, they again issued a circular with contrasting information.

Justice Anita, recording the submissions, observed, “The prescription of a slab connotes that income upto that slab would stand outside the purview of tax exigible to a lower rate of tax, and income above that slab would be treated differently. ....the clarification by the GST Department even as early as in 2017 has taken the correct view.”

The court quashed the circulars issued by the State GST ruling authority.