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).