Prior to 1st July 2012, services provided by RWA to its members were
exempt from service tax if the total consideration received from an individual
member by the RWA for the services did not exceed Rs.3000/- per member per
month. However, with effect from 1st July, 2012, notification No.25/2012 provides
for exemption to service by a RWA to its own members by way of reimbursement of
charges or share of contribution up to Rs. 5000/- per member per month for
sourcing of goods or services from a third person for the common use of its
members.
Important
Clarifications:
Ques: (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 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 Rs.5000/- per member per month 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.
Ques: (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.
Ques: 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.
Ques: 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.
