Q&A on Society Sinking fund, Its GST implication, Use, Collection by CA Ajay Gupta - NOFAA
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Q&A on Society Sinking fund, Its GST implication, Use, Collection by CA Ajay Gupta

Q&A on Society Sinking fund
Q&A on Society Sinking fund
Written by Apartment Times

A Sinking Fund is a money saved in a separate account to pay off a debt, generate funds for a depreciating asset, pay off a future expense, or repay long-term debt. It is a financial technique for ensuring that a monetary shortage does not occur, causing any difficulties. In other words, it prevents an organized legal entity from sinking in debt.

CA Mr. Ajay Gupta

CA Mr. Ajay Gupta

GST is applicable on sinking funds in terms of section 13(2)(a) of the GST Act 2017, considering it is an advance receipt of any planned and unplanned future maintenance of society and treated as a supply of services to members. However, if monthly billing to members including sinking fund is below Rs. 7500/- then there will not be any GST on such billing.


Question. What is the purpose of a housing society’s Sinking Fund?

Answer. A sinking fund is to be generated in specific ways and used for specific purposes in cooperative housing societies. While a housing society is expected to set aside other funds such as a Reserve Fund, Repair and Maintenance Fund, Education and Training Fund, and so on, a Sinking Fund is used when structural repairs are required. When a reconstruction/alteration, heavy repairs, or additions are required (with the input, guidance, and opinion of the Architect), the Sinking Fund serves as a backup fund. Such decisions are discussed, negotiated, and approved during general body meetings after members of the society provide feedback and opinions.

ओएसडी नोएडा अथॉरिटी की जल बोर्ड टीम के साथ बैठक,जानिए अहम फैसले

Question. Does sinking fund attract GST as well?

Answer. Yes, In the case of an apartment, If the Commun Area Maintainance (CAM) plus Sinking Fund exceeds Rs. 7500 per month, then the entire CAM and Sinking Fund amount will attract GST and GST will be levied on the total amount. Sinking fund is collected for future maintenance activity only.


Question. Does both are not two different entities?

Answer. CAM is for current monthly maintenance and sinking fund for future maintenance. Both are collected for the maintenance of the common area only. Any other services by AOA like club services, NOC, Welcome charges etc. will attract GST.


Question. How does a housing society raise money for a Sinking Fund?

Answer. A housing society is required and strongly advised to establish a Sinking Fund, which it can do by collecting financial contributions at a fixed rate from each of its members on a monthly basis and then accumulating it over time to generate a significant amount. It makes sense to start a Sinking Fund as soon as the society is incorporated and occupied because even if a new building is sturdy and up to code, it will deteriorate over time. As a result, a Sinking Fund amassed over a number of years comes in handy for structural repairs.


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