Whether a society can claim credit for invoice received for repairs and maintenance services (“Works Contract”) of the building and adjust the same against their output tax liabilities on account of contribution from members?
Maharashtra Appellate authority of AAR was concerned with the issue as to whether a society can claim credit of invoice received for repairs and maintenance services (“Works Contract”) of the building and adjust the same against their output tax liabilities on account of contribution from members?
The Maharashtra Appellate-AAR recently has answered in Negative with the following justification:
- Society’s core function as prescribed under the bye laws is to manage, maintain and administer the society property for which it raises the required fund by charging to its members. Such provisions of facilities or benefits by the society are covered under the definition of business under the GST laws and such services fall under the SAC 9995 (“Services of Membership Organization”). Since the output services are not works contract services (9954), the same cannot be allowed as ITC under Section 17(5)(c).
2. Society provides security services, cleaning services, R&M services and recover the same under the head maintenance services. The Society never claims that they are providing these individual services and charging tax under individual heads. So society can’t claim now that they are providing work contract services to customers which is similar to their input tax services just to claim ITC on the same.
However, if anyone wishes to opt for Advance ruling with a view that the same can be later challenged in court too, think not just twice but thrice. The Bombay HC in JSW Energy Limited vs UOI and recently in Jotun India P Ltd vs UOI & Ors has held that has held that no appeal in the court is provided against the order passed by the Appellate Advance Ruling Authority where the principles of natural justice were duly followed.
The question arises further as to what would be the tax liability on sinking funds, repairs and maintenance funds which are earmarked for long term repairs only, 9995 (Membership) or 9954 (Works Contract)? Will ITC be allowed against the same or not? Whether the press release/flyer released with respect to societies have any value since they state that the credit of repairs and maintenance of building will be allowed as credit?