Circular No.175 /01 /2014 – ST, F.
No.354/237/2013-TRU, dated 10th
January, 2014
Service tax on ‘club or association
service’ which covers Resident Welfare Association (RWA) was introduced with
effect from 16.06.2005, vide section 65(105)(zzze) read with section
65(25a)[(25a) was later renumbered as (25aa)]. Under the positive list approach
which was followed prior to 1st July 2012, exemption was available
under Notification No. 8/2007-ST dated 01.03.2007, if the total consideration
received from an individual member by the RWA for the services does not exceed
three thousand rupees per month. This notification was rescinded vide
notification No. 34/2012-ST dated 20th June 2012, with effect from 1st
July, 2012.
2. Under the negative list approach,
with effect from 1st July, 2012, Notification No.25/2012-ST [sl.no.28
(c)] provides for exemption to service by a RWA to its Own Members by way of Reimbursement
of Charges or Share of Contribution up to Five Thousand Rupees per month per
member for sourcing of goods or services from a third person for the common use
of its members.
Certain doubts have been raised
regarding the scope of the present exemption extended to RWAs under the
negative list approach. These doubts have been examined and clarifications are
given below:
Sl.
No.
|
Doubt
|
Clarification
|
1.
|
(i) In a
residential complex, monthly contribution collected from members is used by
the RWA for the purpose of making payments to the third parties, in respect
of commonly used services or goods [Example: for providing security service
for the residential complex, maintenance or upkeep of common area and common
facilities like lift, water sump, health and fitness centre, swimming pool,
payment of electricity Bill for the common area and lift, etc.]. Is service
tax leviable?
(ii) If the
contribution of a member/s of a RWA exceeds five thousand rupees per month,
how should the service tax liability be calculated?
|
Exemption at Sl. No. 28 (c) in
notification No. 25/2012-ST is provided specifically with reference to
service provided by an unincorporated body or a non–profit entity registered
under any law for the time being in force such as RWAs, to its own members.
However, a monetary ceiling has
been prescribed for this exemption, calculated in the form of five thousand
rupees per month per member contribution to the RWA, for sourcing of goods or
services from third person for the common use of its members.
If per month per member
contribution of any or some members of a RWA exceeds five thousand rupees,
the entire contribution of such members whose per month contribution exceeds
five thousand rupees would be ineligible for the exemption under the said notification.
Service tax would then be leviable on the aggregate amount of monthly
contribution of such members.
|
2.
|
(i) Is
threshold exemption under notification No. 33/2012-ST available to RWA?
(ii) Does
‘aggregate value’ for the purpose of threshold exemption, include the value
of exempt service?
|
Threshold
exemption available under notification No. 33/2012-ST is applicable to a RWA,
subject to conditions prescribed in the notification. Under this
notification, taxable services of aggregate value not exceeding ten lakh
rupees in any financial year is exempted from service tax. As per the
definition of ‘aggregate value’ provided in Explanation B of the
notification, aggregate value does not include the value of services which
are exempt from service tax.
|
3.
|
If
a RWA provides certain services such as payment of electricity or water bill
issued by third person, in the name of its members, acting as a ‘pure agent’
of its members, is exclusion from value of taxable service available for the
purposes of exemptions provided in Notification 33/2012-ST or 25/2012-ST ?
|
In Rule 5(2) of the Service Tax
(Determination of Value) Rules, 2006, it is provided that expenditure or
costs incurred by a service provider as a pure agent of the recipient of
service shall be excluded from the value of taxable service, subject to the
conditions specified in the Rule.
For illustration, where the
payment for an electricity bill raised by an electricity transmission or
distribution utility in the name of the owner of an apartment in respect of
electricity consumed thereon, is collected and paid by the RWA to the
utility, without charging any commission or a consideration by any other
name, the RWA is acting as a pure agent and hence exclusion from the value of
taxable service would be available. However, in the case of electricity bills
issued in the name of RWA, in respect of electricity consumed for common use
of lifts, motor pumps for water supply, lights in common area, etc., since
there is no agent involved in these transactions, the exclusion from the
value of taxable service would not be available.
|
4.
|
Is
CENVAT credit available to RWA for payment of service tax?
|
RWA
may avail cenvat credit and use the same for payment of service tax, in
accordance with the Cenvat Credit Rules.
|
3. Trade Notice/
Public Notice to be issued. Hindi version to follow.
0 comments:
Post a Comment