Top Stories Common area Electricity Charges collected by Residential Welfare Associations from members deemed part of Composite Supply; Liable to GST if the service does not qualify for exemption: AAR [Read Order] By Devanand T R – On March 15, 2024 5:32 pm – 2 mins read The West Bengal Authority for Advance Ruling ( AAR ) has held that the common area electricity charges collected by Residential Welfare Associations ( RWAs ) from their members are deemed part of a composite supply and are liable to Goods and Services Tax ( GST ) if the service provided does not qualify for exemption.

The issue brought before the AAR concerned the taxability of common area electricity charges levied by RWAs on their members. The applicant, PRINSEP ASSOCIATION OF APARTMENT OWNERS sought clarity on whether they were liable to pay Central Goods and Services Tax ( CGST ) and State Goods and Services Tax ( SGST ) on the collection of these charges, particularly when they are recovered based on the actual electricity consumption. RWAs often collect charges from their members to cover the expenses related to common area electricity consumption. These charges contribute to the maintenance and upkeep of shared facilities such as lighting in common areas, lifts, corridors and other communal spaces within residential complexes.

The AAR, after examining the nature of these charges in the context of GST regulations, determined that the collection of common area electricity charges is part of a composite supply, wherein the supply of common area maintenance services is bundled with the supply of electricity. However, it was also clarified that the tax liability on these charges depends on whether the service provided by the RWA qualifies for exemption under GST regulations. If the service does not meet the criteria for exemption, it would be subject to GST at the applicable rate.

A composite supply involves two or more goods or services bundled together and supplied in the ordinary course of business, while a mixed supply involves two or more individual supplies of goods or services combined to form a single transaction. The AAR clarified that the supply of common area maintenance services and electricity constitutes a composite supply.

Therefore, the common area electricity charges collected by RWAs are deemed part of this composite supply. However, whether these charges are liable to GST depends on the eligibility for exemption under GST regulations. If the service provided by the RWA qualifies for exemption under serial number 77 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended., the common area electricity charges would not attract GST.

But if the service does not qualify for exemption, GST would be applicable at the prescribed rate. In conclusion, the two-member authority comprising Dr. Tanisha Dutta ( CGST Member ) and Joyjit Banik ( SGST Member ) clarified that common area electricity charges collected by RWAs from their members are deemed part of a composite supply and are liable to GST if the service provided does not qualify for exemption under GST regulations.