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
pusrpose 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.