Contribution made to RWA above Rs. 7500 shall be taxable instead of curtailing the entire exemption

Petitioner: Resident Welfare Associations (RWA) and an individual residing in an apartment

Respondents: Pr. Chief Commissioner of GST & Central Excise, Asst Commissioner of Central Excise & Service Tax & Tamil Nadu Authority for Advance Ruling

Authority: Madras High Court

Date: 1st July 2021

Case: Writ Petitions were filed to quash Circular No. 109/28/2019-GST dated 22.07.2019 and Order No. 25/ARA/2019 dated 21.06.2019 as illegal, arbitrary and ultra vires the Constitution of India and provisions of CGST Act, 2017. An exemption was granted to contributions made to RWA upto an amount of Rs. 7,500/- per month per member for sourcing of goods and services from a third person for the common use of the members of RWA.

Core Issue: Where contribution exceeded Rs. 7,500/- the residents would lose the entire entitlement to exemption or the exemption shall continue upto Rs. 7,500/- and only the difference would be eligible to tax?

Court’s Observation:

1. The Court observed that there is no ambiguity in provisions granting exemptions and it is only a question of interpreting the same.

2. The term ‘upto’ hardly needs to be defined and connotes an upper limit. It is interchangeable with the term ‘till’ and means that any amount till the ceiling of Rs. 7,500/- would exempt for the purposes of GST.

3. 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 stand quashed.

Judgement: It is only contributions to RWA in excess of Rs. 7,500/- that would be taxable under GST Act.