MUMBAI: The Appellate Advance Ruling Authority (AAAR), West Bengal bench, has held that contribution received by a resident welfare association (RWA) from its members towards Corpus or Sinking Fund is taxable at the time of receipt. The RWA has to pay GST at the time of receipt of such sums.
The Appellate AAR observed that a member contributes to such funds with an agreed condition that the RWA will provide some specific services in future, as and when required out of the said funds.This money is never refunded back to the members but is always in the possession of the RWA for bearing future expenses. Hence, such contribution is not of the nature of a deposit in the truest sense of the term but is an advance payment made by the members of the RWA for receiving a supply of common area maintenance services to be provided to them by the RWA in future.
Prinsep Association of Apartment Owners who had filed an appeal against the advance ruling given earlier, contended that as the funds are maintained for future contingencies the same should be subject to GST when they are used (in other words, when there is an actual supply of service). However, the AAAR upheld the earlier ruling and held that the contribution to the Corpus/Sinking fund will be subject to GST at the time of receipt.