Applicability of GST on Co-operative Housing Societies

GST on CO-OP. SOC.

OFFICE BEARERS OF CHS. I AM QUITE SURE THIS MAIL WILL BE OF INTEREST TO YOU .

GST Insight and applicability of GST on Co-op Hsg Societies-

Why Maharashtra Housing Society is covered under GST

GST is applicable to the dealer-person who is rendering the service or supplying the goods in its regular course of business activity.

Person has been defined under 2(84) as follow:-

“person” includes— (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (e) a Limited Liability Partnership; (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013; (h) anybody corporate incorporated by or under the laws of a country outside India; (i) a co-operative society registered under any law relating to co-operative societies; j) a local authority; (k) Central Government or a State Government; (l) society as defined under the Societies Registration Act, 1860; (m) trust; and (n) every artificial juridical person, not falling within any of the above.

From this it can be noted that under clause (i) a co-operative housing society will be covered.

Can the activities of housing Societies be considered as “Business Activity”?

The term business has been defined under Section 2(17) as follow:- “business” includes–– (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) services provided by a race club by way of totalisator or a license to book maker in such club ; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;

The above clause (e) specifically covered a Society, thus the housing society will be considered as carrying out activities in furtherance of business and will be liable for Registration under GST.

REVERSE CHARGES

The “reverse charges” has been define u/s 2(98) as “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act.

Thus, under the following cases the Recipient must pay the required GST

1) Any transaction notified by the Government, as on date nothing has been notified but likely it may be for a) Transport payment b) Lawyer Professional Fees c) Security Payment d) Payment where people are providing labour, etc.

2) Obtaining goods / services from UNREGISTERED DEALER.

The recipient will have to prepare an Invoice in such circumstances and pay the tax to government and prepare Payment Voucher

ALL persons liable to pay tax under Reverse Charges will have to be registered themselves under the act irrespective of their liabilities on basis of Turnover. In all probabilities, most of even small societies may be coming for registration under this provision of section 24(iii) and (iv)

Summary of above Act and Few Queries-

1) Whether the Maharashtra Housing Society will be covered under GST ?

Answer is YES

2) Whether any exemption is available on basis of turnover?

YES

a) If the Society’s aggregate receipt of turnover is less than ₹ 20,00,000 it will not be liable for Registration and tax collection.

b) If the Society’s aggregate receipt of turnover is more than ₹ 20,00,000 but less than ₹ 50,00,000 and does not desired to claim any tax credit on its expenses paid GST it can go for Composition Scheme under Section 10.

c) If the Society’s aggregate receipt of turnover is more than ₹ 50,00,000 it will be fully covered like any other business entity.

3) Will the Billing format of the Society will have to be changed ?

Yes, the format will have to be changed and it will be changed as format to be notified.

4) Will the method of accounting have to be changed?

Yes, now as the tax paid on the expense side is available under specific scenario, the party-wise details have to be uploaded and the work being done with various type of online / offline programs will undergo a major change to provide for recording detailed expenses in lieu of recording transactions as being done presently, whereby few society are paying collecting and paying taxes inefficiently increasing the cascading effects.

5) Will the Input tax Credit be available on all the expenses incurred by the Society ?

On following expenses where the taxes are paid No Input tax Credit will be available, i.e.

a) Electricity Expenses

b) Stamp Duty

c) Property Tax

6) Will the reverse charge mechanism applicable to the Society?

On certain transaction, it’s expected that reverse charge mechanism will be applicable and accordingly the GST will have to be paid first and then the Credit may be claimed. Details provided in Annexure “D”.

Under GST, all dealers including a Society will have to file 3 returns in a month for each and every transaction on the billing side on 10th of following month and on expenses side on 15th of following month and consolidated return on 20th of following month and an Annual Return has to be filled. Thus in all 37 returns will have to be filled.

Other than these, if they deduct TDS then they will have to also filed GSTR-7 by 10th of the following month.

However, certain societies may fall under quarterly return if they have opted for Composition Scheme by forfeiting all the Credit on expenses and willing to pay tax on receipts. Composition Scheme is not dealt with over here as it requires a separate approach.

7) Will a Separate Audit be required under GST?

Yes, if the turnover exceeds prescribed limit. Thus, in effect there may be minimum 3 audit as follow: –

a) Statutory Audit

b) GST Audit

c) Income Tax Audit

8) On what amount GST must be paid?

GST is payable on consideration, which has been defined under section 2(31) of the CGST and state law have been requested to follow and align their laws in line with CGST. Thus, it is assumed at this moment that it will be the same. Consideration includes not only amount receivable for an activity but also monetary consideration for agreeing to refrain from an activity.

However, it’s provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply . That means on deposit there will be no GST, unless supply and / or service is made against that deposit.
FOR CO OP. SOC. RESIDENTS USERS & WELFARE ASSOCIATION (REGD).

ADV. VINOD SAMPAT
FREE ADVICE TILL 31-5-2017 TO CHS LTD.

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18 Comments on “Applicability of GST on Co-operative Housing Societies”

  1. Shyamala Balasubramanian says:

    What does “aggregate receipt of turnover” mean for a cooperative housing society or condominium?

    Is it the total maintenance fees collected from the flatwowners or is it the total expenditure incurred by the society in a year?

    Does it include the interest income on the corpus invested by the CHS in a bank?

    • yazdi says:

      From the wording, it looks like it includes all items on the Income Side of the Income & Expenditure Account of the Society

      • Shyamala Balasubramanian says:

        But if the income from the corpus bank deposit is included for GST, that would mean that the corpus interest is taxed twice, once for income tax and again for GST. How can this be allowed?

  2. There are cases where the society has flats of different sizes and maintenance charges for some flats are more than Rs.5,000/- and for other the maintenance charges are lower than Rs,3,000/-. It is unreasonable to ask the small flat holders to pay 18% GST just because some other members have maintenance charge exceeding Rs.5,000/-. Some exemption of concession for such small flat-holder is required. Otherwise Peter will have to pay more for the reasons attributable to Paul. This injustice needs to be removed.

    • Arup says:

      Since the input credit can be claimed in full if every member of society is paying GST – there is no injustice to anyone. Else the input credit cannot be claimed in full – and society will actually be spending more on paying GST.

  3. Santosh Murdeshwar says:

    I live in coop housing society wherein the monthly Maintainance charge is less than 5000 but annual turnover of the society is more than 20 lakhs.. For we need to register in GST?

  4. anubhav says:

    documents required for gst registration of cooperative society

  5. Shamal says:

    I feel there is a misunderstanding in interpretation of GST law. The GST for Coop Housing Societies will be applicable if the following two conditions are met:

    a) The monthly maintenance billing for individual apartment exceeds Rs. 5,000/- This should exclude Property Tax, Electricity Charges recovery, stamp duty recovery, etc which are specific to the apartment owner.

    b) The total ‘Taxable’ collection exceeds Rs. 20,00,000/-. This minimum threshold under the older Service tax Act used to be Rs. 10,00,000.

    GST will be applicable if above both conditions are met.

  6. nc panicker says:

    But can a service provider opt for composition scheme ?

  7. Abhishek Kumar says:

    If society is not fully handed over and currently being maintained by builder but charges are being paid by residents in that cash can we get the benefit or not? (because builder is charging 18% gst from residents)

  8. Rose Sharma says:

    Is GST registration required if annual income is lesser than 1 lakh.

  9. Anil Sampat says:

    Shri Vinodbhai Sampat has opined that Society can go for Composition Scheme under section 10. Vinodbhai is requested to revisit section 10. Composition Scheme is not available to service suppliers except to restaurants- need to enlighten Societies in the matter please.

  10. Dr Viswanatham says:

    We are a Senior Citizen community and registered our Society under Societies registration. Flat Owners Welfare Society entered into a tripatriate agreement with a Service provider and the developer( He is only signatory as he has not handed over the complex fully to the society He doesnt collect any maintenance nor involved in to day affairs of the society)
    . The Service provider is giving catering service for which he charges for the members who avail the catering services ( He charges monthly Rs 4500 or so for package for monthly food charges -Not all peoiple avail this facilty) ) and in addition all the members have to pay Rs2500 per month for maintenance charges per month towards electricity charges for Generators, lifts security, maintaining health services for the members.

    Our question is whether our welfare association is liable for GST ? or the Service provider has to pay GST ? He is collecting Rs 2500 per month from about 250 flats. which is 75,00000 (Seventy Five Lakhs) . Who has to pay the GST? Service provider or the flat owners? if so is it 18%.
    What are concessions available for Housing societies? Looking forward for your reply
    Thanks
    Viswanatham

  11. J.J.chaudhry says:

    can a society opt for composition gst whose annual collection is more than 20 lacs but less than 50 lacs. Monthly billing is less than Rs. 5000 per member.

  12. Anil kumar b says:

    Nice compilation on gst.
    But still i fail to underatand when a body is formed to maintain common premises in a volunatry form how vould it come under the purview of gst partuclalry when it is not carrying out any commercial activity.

    Yes…the society word has been included in the definition or the clauses of gst but because there are other types of activities which carryout commercial or business activity, it is natural but to include society too.

    Thus housing society thus becoems purely incidental to be considered under gst liability. It is my opioon. I am not an expert on tax but commenting as a common man logic.

  13. New Evershine Gardens CHS Ltd says:

    Its an opaque situation. GST is not applicable to our CHS as we are not meeting the criterions of 5000 per member or 20 lakhs yearly. However, our security provider has charged 9+9=18% GST. We are paying approx 9000/- GST on their monthly bill.

    Can our CHS claim it from IT dept? If so, what are the formalities related to be complied with ?


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