Question ID :
44654
224173
Whether Deposits received from the members of a/an Apartment Owners Association/Residential Association (the Association) towards future supplies is taxable at the time of its receipt?
Contentions:
1. Deposits received from the members of an Association towards future supplies is taxable u/s. 7(1)(aa).
2. However, the taxability u/s. 7(1)(aa) attracts only if there is any consideration
3. As per the proviso to section 2(31), a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply.
As such can one construe/interpret that-
• unless the Supplier (the Association) applies (expends) such deposit (towards any supply) there is no payment made for such supply (and hence no consideration) as per section 2(31)
• Taxability u/s. 7(1)(aa) arises only in the case of ‘consideration’. In case of such deposits, deposits received in advance partakes the character of consideration only when Supplier (the Association) applies (expends) such deposit (towards any supply to its members) as per the proviso to section 2(31).
• Hence the time of supply shifts to the time of actual application of such deposits as against the date of receipt of payment (herein in advance) as envisaged u/s. 13(2)(a).
• Hence no GST to be paid at the time of receipt of such Deposits, but only when and if at all the Supplier (the Association) applies (expends) such deposit (towards any supply to its members).
Posted by
SREEJITH M G
on
May 24, 2024
Filed Under
GST
Mr. Sreejith your understanding is right. Deposits are taxable only when the Same is utilized for a supply. The Said view is also supported by many of the Authority for Advance Rulings. Though Advance Rulings are applicable to the person who has applied for it, when it is in line with law certainly it can be relied upon.
Posted by
SREENIVASULU THULASIRAM on
May 26, 2024