11 August 2017
Background: We are into the business of construction & development. It is a general practice in the industry that for large scale projects say 40 storied tower, Occupancy Certificate (OC) is obtained in parts i.e. OC for G+16 flr then for 17-28 flr and so on. Possession is delivered accordingly. The expenses related to maintenance & upkeep of that part of the building which is inhabited by the occupants is divided on per square feet and on that basis monthly maintenance charges are collected from them. Any balance amount left (excess collection) is kept in separate bank account which will be transferred to the society whenever is it formed along with all the records and accounts of the amount collected and applied towards expenses. We are not providing any services directly. There are different agencies/contractors appointed for such services working on AMC basis who are registered as well as URD under GST.
Query: Is GST applicable on such maintenance collection? Whether we will be treated as 'Pure Agent' as defined under the valuation rules & do not charge GST on such collections?
11 August 2017
Yes GST is applicable on such maintenance.
Pure agent concept will not be applicable in your case as the society itself is not formed when you do the maintenance. There are certain conditions for pure agent one of which is that the invoice should be in the name of the person for whome you are making the payment. In your case invoice is not in the name of society.
12 August 2017
Thanks for your valuable response. The rule regarding 'Pure Agent' (which is reproduced below) does not stipulates the condition of invoice. And the agreement for sale specifically mentions that the developer shall collect pro-rata expenses from the tenants and use it towards the upkeep of the building. The purchaser of the flat authorises the developer to act as his agent in the said agreement for sale. Hence the developer acts as an agent of the purchaser/tenant. Please elaborate.
33. Value of supply of services in case of pure agent.- Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,- (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient; (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation.- For the purposes of this rule, the expression “pure agent” means a person who- (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.
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