GST on Society Maintenance Above ₹7,500: Supreme Court Case

Statutory Framework, Mutuality, Judicial Position, Advance Rulings and Practical Compliance

Purpose and scope

This article examines the GST treatment of collections made by cooperative housing societies, apartment owners’ associations and resident welfare associations from their members. It focuses on monthly maintenance, sinking/corpus funds, capital contributions, transfer-related receipts and electricity recoveries. The analysis separates the statutory position from departmental interpretation, judicial rulings and advance rulings, because the law on member-to-association transactions remains under constitutional and appellate scrutiny.

1. The Short Version

• Maintenance collected by a registered society or RWA from its members can fall within Entry 77(c) of Notification No. 12/2017-Central Tax (Rate), which exempts qualifying contributions up to ₹7,500 per month per member for sourcing goods or services from a third person for common use in a housing society or residential complex.
• The ₹7,500 exemption is not the same thing as the GST registration threshold. Section 22 concerns taxable supplies and the ₹20 lakh threshold in ordinary States; Section 23 separately excludes persons engaged exclusively in wholly exempt/non-taxable supplies. Thus, registration must be examined from the society’s actual mix of supplies and receipts.
• Three important legal questions remain contested: (i) whether the doctrine of mutuality survives the 2021 GST amendments; (ii) whether, where Entry 77 applies, only the amount above ₹7,500 is taxable or the whole contribution becomes taxable once the ceiling is crossed; and (iii) whether corpus/sinking/capital collections are consideration for a present or future supply.
• The Supreme Court in State of West Bengal v. Calcutta Club Ltd. upheld mutuality in the service-tax context. The Kerala High Court in Indian Medical Association (11 April 2025) subsequently declared Sections 2(17)(e), 7(1)(aa) and its Explanation unconstitutional in the GST context; the Union of India has obtained leave in the Supreme Court and the matter remains pending.
• The Madras High Court in Greenwood Owners Association (1 July 2021) held that only the contribution exceeding ₹7,500 was taxable, but that portion of the judgment was stayed in the Revenue’s appeal. Accordingly, the CBIC’s Circular No. 109/28/2019-GST continues to represent the departmental position on the whole amount.

2. Statutory Framework

2.1 The charging architecture: supply, consideration and business

Section 7(1)(a) of the CGST Act brings within “supply” the forms of supply of goods or services made or agreed to be made for a consideration by a person in the course or furtherance of business. Section 2(17)(e), after the Finance Act, 2021 amendment, expressly includes within “business” the provision by a person of facilities or benefits to its members for a consideration.

“the activities or transactions, by a person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration”

Section 7(1)(aa), CGST Act, 2017, inserted by the Finance Act, 2021 with retrospective effect from 1 July 2017.

The Explanation inserted alongside Section 7(1)(aa) further provides that, for this purpose, the person and its members/constituents are deemed to be two separate persons and the supply is deemed to take place from one to the other. This is the statutory provision directly engaged in the mutuality controversy.

2.2 The doctrine of mutuality and the constitutional question

Before the 2021 amendment, the principal difficulty in taxing member contributions was the conceptual requirement of a supply/service by one person to another for consideration. The Supreme Court’s decision in Calcutta Club treated the identity between members and the members’ club as decisive in the service-tax context.

“there is no sale by one person to another for consideration, as one cannot sell something to oneself”

State of West Bengal v. Calcutta Club Ltd., (2019) 19 SCC 107, para 76.

The Court’s final answers were categorical: the doctrine of mutuality continued to apply to incorporated and unincorporated members’ clubs after the 46th Amendment, and the earlier Young Men’s Indian Association line of authority continued to hold the field. Importantly, however, Calcutta Club was decided under the pre-existing service-tax legislation; it did not adjudicate the constitutional validity of the later Section 7(1)(aa) GST deeming provision.

2.3 The ₹7,500 exemption

Entry 77(c) of Notification No. 12/2017-Central Tax (Rate), as amended by Notification No. 2/2018-Central Tax (Rate), exempts the specified service by an unincorporated body or non-profit entity registered under law to its own members by way of reimbursement of charges or share of contribution, where the contribution is up to ₹7,500 per month per member for sourcing goods or services from a third person for common use in a housing society or residential complex. The ceiling was increased from ₹5,000 to ₹7,500 with effect from 25 January 2018.

“up to an amount of seven thousand five hundred rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex”

Entry 77(c), Notification No. 12/2017-Central Tax (Rate), as amended.

The wording “up to” became the central interpretive issue in Greenwood Owners Association. The Department reads the entry as a threshold condition: once the monthly contribution exceeds ₹7,500, the exemption disappears and the whole amount is taxable. The Madras High Court read it as a ceiling on the exempt portion, so that only the excess is taxable. That judgment is presently stayed in appeal.

2.4 Registration: Sections 22 and 23 must be read together

Section 22(1) provides that a supplier making taxable supplies becomes liable to registration when aggregate turnover exceeds ₹20 lakh in an ordinary State, subject to the statutory provisions applicable to the particular State. Section 23, however, excludes a person engaged exclusively in supplying goods or services that are wholly exempt or not liable to tax. Therefore, it is inaccurate to state simply that crossing ₹20 lakh of receipts automatically creates GST liability.

“Every supplier shall be liable to be registered ... from where he makes a taxable supply ... if his aggregate turnover in a financial year exceeds twenty lakh rupees”

Section 22(1), CGST Act, 2017.

“any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax”

Section 23(1)(a), CGST Act, 2017.

The practical consequence is that the society must identify taxable as well as exempt supplies and determine whether it is required to register. Aggregate turnover is a statutory concept and should not be equated mechanically with every accounting receipt.

2.5 Time of supply and advances

Where a receipt is legally consideration for a taxable service, Section 13 governs the time of supply. Under Section 13(2), the relevant event can include the date of receipt of payment, depending upon the statutory sequence. Consequently, where a corpus or capital contribution is held to be an advance towards taxable services, the timing issue can arise at collection rather than only when the fund is subsequently spent. This is the reasoning adopted in several AARs; it should not be confused with the separate threshold question of whether the receipt is consideration.

2.6 Pure-agent recoveries

Rule 33 of the CGST Rules permits exclusion of expenditure incurred as a pure agent from the value of supply where the prescribed conditions are satisfied, including separate indication in the invoice, recovery of only the actual amount paid to the third party and the recipient’s liability to the third party. Thus, electricity or statutory charges cannot be excluded merely because the society calls them “reimbursement”; the factual and documentary conditions of Rule 33 matter.

CBIC Circular No. 109/28/2019-GST also addresses pure-agent treatment of statutory charges. The circular states that certain amounts such as property tax and electricity charges can be excluded where the RWA acts as a pure agent and the prescribed conditions are fulfilled.

3. CBIC Circular No. 109/28/2019-GST (22 July 2019)

The circular was issued specifically to address GST on monthly subscriptions/contributions charged by RWAs. It confirms that the Entry 77 exemption applies to qualifying contributions up to ₹7,500 per month per member and states that the limit is to be examined per flat/member rather than by averaging the society’s collections. Most importantly, it states that if maintenance charges exceed ₹7,500, the entire amount is taxable.

“if the charges exceed ₹7500/- per month per member, the entire amount is taxable”

CBIC Circular No. 109/28/2019-GST, dated 22 July 2019.

This is an administrative clarification, not a statutory amendment. Its legal validity and consistency with Entry 77 were directly considered in Greenwood Owners Association.

4. Key Judgments

4.1 State of West Bengal v. Calcutta Club Ltd.

The Supreme Court examined both sales-tax and service-tax treatment of members’ clubs. For service tax, the Court reasoned that the statutory definition required an activity carried out by one person for another for consideration, and held that mutuality prevented a service from being supplied to oneself. The Court expressly recognised that its conclusion was based on the statutory scheme then before it.

For present purposes, the significance of Calcutta Club is therefore twofold: first, it is the principal Supreme Court authority on mutuality in the service-tax context; second, it explains why the later GST deeming provisions were considered necessary by the Union, and why their constitutional validity became the central issue in IMA Kerala.

4.2 Greenwood Owners Association v. Union of India

The Madras High Court compared the language of Entry 77 with other exemption entries and held that the use of “up to” was deliberate. It distinguished a provision that makes an entire exemption conditional upon remaining below a threshold from a provision that exempts an amount up to a stated ceiling.

“The plain words employed in Entry 77 being, ‘upto’ an amount of Rs.7,500/- can thus only be interpreted to state that any contribution in excess of the same would be liable to tax.”

Greenwood Owners Association v. Union of India, Madras High Court, 1 July 2021, para 23.

The Court ultimately held that only contributions in excess of ₹7,500 were taxable. However, because the Revenue’s appeal resulted in a stay of the relevant portion of the judgment, the decision should now be presented as a significant but non-operative appellate proposition rather than as the prevailing departmental rule.

4.3 Indian Medical Association (Kerala State Branch) v. Union of India

The Kerala Division Bench confronted the constitutional question created by the Finance Act, 2021. It examined Article 246A, Article 366(12A), the meaning of “supply” and “service”, and the effect of the statutory deeming fiction introduced by Section 7(1)(aa).

“the concepts of supply and service do require a plurality of persons to infer their existence”

Indian Medical Association, Kerala State Branch v. Union of India, Kerala High Court, 11 April 2025, para 13.

The Court reasoned that the Constitution contemplates a supply/service relationship involving at least a provider and recipient and concluded that Parliament could not, by ordinary legislation alone, give the constitutional expression “supply” a meaning inconsistent with the Supreme Court’s interpretation of that constitutional scheme. It consequently declared Sections 2(17)(e), 7(1)(aa) and the Explanation thereto unconstitutional and void.

The issue is now before the Supreme Court. The Supreme Court granted leave on 8 December 2025 and directed expedited hearing; available case-status material records Civil Appeals 2526–2527/2026 as pending. Accordingly, IMA Kerala should be described as an operative Kerala High Court judgment under appeal, not as a final nationwide settlement of the GST mutuality issue.

5. Advance Rulings and Special Contributions

Advance rulings are generally binding on the applicant and the jurisdictional officer in respect of that applicant, subject to the statutory framework. They are nevertheless frequently relied upon by departmental officers and are useful indicators of the administrative interpretation of particular fact patterns. They should therefore not be presented as judgments of general application.

6. Worked Example: ₹5,000 Lift Contribution

Facts: ₹7,000 monthly maintenance plus ₹5,000 per flat per month for installing/replacing lifts, with the society otherwise within the GST registration framework and assuming the ₹5,000 is treated as a taxable capital/corpus contribution.

Capitalising the lift expenditure in the society’s books does not, by itself, decide the GST question. The first legal enquiry is whether the receipt is consideration for a taxable supply. The second is whether any exemption applies. Accounting treatment is evidence of the nature of the transaction, but is not a substitute for the statutory test.

6.1 Input tax credit on lifts and capital works

Section 17(5)(c) restricts ITC on works contract services supplied for construction of immovable property other than plant and machinery, subject to the statutory exception for further supply of works contract service. Section 17(5)(d) similarly blocks goods or services received for construction of immovable property on the taxable person’s own account, other than plant and machinery. The Explanation provides that “construction” includes reconstruction, renovation, additions, alterations or repairs to the extent of capitalisation.

“works contract services when supplied for construction of an immovable property (other than plant and machinery)”

Section 17(5)(c), CGST Act, 2017.

Whether a particular lift installation falls within “plant and machinery” requires a fact-specific examination of the statutory definition and the manner in which the lift is fixed to earth and used.

7. Practical Solutions for Housing Societies and RWAs

• Test the nature of every receipt, not merely its accounting head. Monthly maintenance, sinking/corpus funds, transfer fees, parking, interest and special levies may have different GST consequences.
• Track the ₹7,500 maintenance exemption per qualifying member/flat and preserve the underlying invoices, resolutions and vendor bills.
• Separate capital/corpus collections from ordinary maintenance in the society’s resolutions, invoices, ledgers and bank records. Separation does not itself create exemption, but it preserves the factual basis for a separate legal analysis.
• Before treating a corpus as a non-taxable deposit, examine whether members have an enforceable right to repayment or whether the amount is actually earmarked as consideration for present/future services. The distinction is central to the AAR reasoning.
• Where taxable supplies exist, determine registration under Sections 22–24 together with Section 23. Do not use the ₹20 lakh threshold in isolation.
• Where electricity or statutory charges are claimed as pure-agent recoveries, comply with Rule 33 and retain third-party bills, authorisations, separate disclosure and proof of actual recovery.
• Reconcile input tax credit separately for taxable and exempt activities and examine Section 17(5) before claiming ITC on capital expenditure.
• Review the position periodically because the Supreme Court’s decision in the IMA appeal and the pending Greenwood appeal may materially change the legal landscape.

8. A More Precise Legal Conclusion

The GST treatment of housing-society collections cannot be reduced to the proposition that “maintenance above ₹7,500 is taxable” or that “all member contributions are exempt”. The legally accurate analysis has at least four stages: first, identify whether the receipt is consideration for a supply; second, consider the mutuality challenge and the effect of Sections 2(17)(e) and 7(1)(aa); third, if the supply is taxable, test the specific exemption in Entry 77 and the departmental interpretation of the ₹7,500 ceiling; and fourth, determine registration, time of supply, valuation and ITC consequences.

As at 30 September 2026, the statutory text favours the Revenue’s distinct-person/deemed-supply approach, CBIC Circular No. 109 adopts the whole-amount interpretation, and several AARs have treated special contributions as taxable. Against this stands the Supreme Court’s mutuality jurisprudence in Calcutta Club, the Madras High Court’s interpretation of “up to” in Greenwood (presently stayed), and the Kerala Division Bench’s constitutional ruling in IMA Kerala (presently under Supreme Court appeal). The responsible conclusion for readers is therefore not that one proposition has conclusively displaced all others, but that the applicable position depends on the nature of the receipt, the State, the procedural posture of the relevant litigation, and the society’s factual documentation.

9. Bibliography

• Central Goods and Services Tax Act, 2017 · Sections 2(6), 2(17)(e), 2(31), 7, 13, 15, 17(5), 22 and 23.
• Notification No. 12/2017-Central Tax (Rate), dated 28 June 2017 · Entry 77(c), as amended by Notification No. 2/2018-Central Tax (Rate), dated 25 January 2018.
• CBIC Circular No. 109/28/2019-GST, dated 22 July 2019 · GST on monthly subscription/contribution charged by RWAs.
• State of West Bengal v. Calcutta Club Ltd., (2019) 19 SCC 107 · Supreme Court.
• Greenwood Owners Association v. Union of India, W.P. Nos.5518 & 1555 of 2020 etc., judgment dated 1 July 2021 · Madras High Court; relevant portion stayed in appeal.
• Indian Medical Association, Kerala State Branch v. Union of India, W.A. Nos.1659 & 1487 of 2024 & 468 of 2025, judgment dated 11 April 2025 · Kerala High Court.
• Union of India v. Indian Medical Association · Civil Appeals 2526–2527/2026, pending before the Supreme Court as per available case-status records as of the review date.

10. Disclaimer

This article is intended as a legal research and compliance note. Advance rulings are fact-specific and generally bind only the applicant and the concerned officer. Judicial positions stated as stayed or under appeal should not be represented as final law. The constitutional validity of the GST mutuality amendments remains before the Supreme Court, and any subsequent order, stay, judgment, legislative amendment or notification should be checked before acting on the article. This article represents the personal views of the author.