RWA ITC benefit — sec 171 — should it go only to members who paid GST?

Service Tax (Legacy) 277 views 2 replies

Uma Shankar

Retired

1 Points Posted on 03 June 2026

in our RWA maiantenance is charged per sq ft. GST is collected only from members paying more than 7500/month. now RWA claims ITC on its inputs and the saving from that is passed on to ALL members by reducing overall maintainance.

but here is my doubt. since billing is per sq ft we can actually calculate exaclty how much each GST paying member contributed to the RWA’s ITC pool. so shouldnt the benefit under sec 171 go back only to those members and not to everyone incl exempt members?

if we give it to all members arent the GST paying members basically cross subsidising the others? is that not profiteering techincally?

has any AAR or circular dealt with this? pls advise

Replies (2)

Quick Summary

An RWA claims ITC on inputs and passes the benefit through reduced maintenance charges. A question arose whether ITC benefits should go only to GST-paying members. The discussion noted that ITC is generally treated as reducing the RWA's overall cost base, with benefits commonly shared among all members.

Aashok FC Advisory

Finance Compliance Consultant

987 Points Posted on 03 June 2026

The RWA's practice of distributing ITC benefits across all members, rather than exclusively to GST-paying members, is generally based on the principle of collective maintenance for the entire association. Whether this constitutes anti-profiteering is a nuanced legal question, and you should review state-specific AARs or consult a local tax professional to determine if your RWA's distribution method aligns with your local regulatory framework.

Tax Garden

Tax Consultant

701 Points Posted on 04 June 2026

Good catch on the structural issue. The law and practice here are worth unpacking.

Under section 171 of the CGST Act, the anti-profiteering requirement says that ITC benefits shall be passed on to the recipient by way of commensurate reduction in prices. For an RWA, recipients are the members who receive the maintenance service.

The standard practice, supported by several state AARs, is to distribute the ITC benefit across all members proportionately to their maintenance contribution, not selectively to only GST-paying members. The reason: the ITC belongs to the RWA as an entity, used to reduce its aggregate cost base, and the cost reduction is reflected in the overall maintenance rate charged to everyone.

On the cross-subsidy argument: you are technically correct that GST-paying members contributed to the ITC pool while exempt members did not. However, the NAA has generally not treated this as a section 171 violation for cooperative societies and RWAs, because the underlying supply (maintenance) is indivisible.

A more precise approach is possible: if your RWA calculates ITC savings as a percentage of total GST billed and restricts the credit only to GST-paying members invoices, that method is also defensible and removes the cross-subsidy. It requires a split maintenance ledger.

Checking the state AAR for your state for RWA-specific rulings is a good next step. Tax Garden handles residential society GST compliance including anti-profiteering assessments. See [our GST services](https://taxgarden.in/services).