GST, as the name suggests is a tax on goods and services, the sole taxable being event being “supply”.
Under Sec 7(1) of the CGST Act, the expression “Supply” includes – all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration in the course or furtherance of business.
Supply must be made in the course or furtherance of business in order to be taxable under this clause. Hence it is important to understand the meaning of the term “business”. The term “business” as defined under Sec 2(17) of CGST Act includes – 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.
Supply must be made by a person. The term person as defined under Sec 2(84) of the CGST Act includes – a co-operative society registered under any law relating to co-operative societies.
Therefore, considering the definition of supply as well as definition of business and person, it is clear that services provided by the Housing Societies to its members are subject to GST.
Taxability:
In case, a Cooperative Housing Society is collecting more than Rs 5000 per month from a society member and if the annual maintenance collection of the society is above Rs 20 lakh, then 18% tax would be levied on the Cooperative Housing Society.
If the society’s maintenance amount is less than Rs 5,000 per member, but if the society’s membership base is large and the total collection exceeds Rs 20 lakh per annum, the society would be liable to pay GST.
The GST is not applicable on municipal tax, property tax, water bill, non-agricultural land tax, sinking fund, etc. All other charges, including repair fund, attract the 18% GST levy.
Exemption:
Certain exemptions to the above rule is as under:
Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution –
(a) as a trade union;
(b) for the provision of carrying out any activity which is exempt from the levy of GST;
(c) up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex.
Registration of a Co-operative Housing Society
Situation I:
Housing societies will need to charge 18% GST to its members if maintenance recovery is more than Rs.5000/- p.m. per member and if total maintenance recovery by a society exceeds Rs. 20 lakh per annum. Accordingly, only those societies who fall in this category (i.e. fulfilling both the conditions) will need to register under GST & charge from July onwards.
Situation II:
Housing societies which are liable to pay GST on reverse charge basis have to get themselves compulsorily registered under GST irrespective of the amount of turnover.
“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. One of the major instances wherein GST has to be paid under reverse charge basis is when goods / services are obtained from an unregistered dealer. In all probabilities, most of small societies may be coming for registration under this provision.
Ways and means to avoid GST levy on housing societies
If you are paying more than Rs 5000 per month as maintenance charges to your co-operative housing society (CHS), then you will have to pay the Goods & Service Tax (GST) at the rate of 18% on the maintenance charges from July 1, 2017.
However, if you or your society wish to avoid paying GST, your society will have to rework the maintenance bill heads appropriately.
GST is not applicable on municipal tax, property tax, water bill, non-agricultural land tax, sinking fund, etc. All other charges, including repair fund, attract the 18% GST levy.
Hence, the CHS can create separate heads of expenses that are not liable to tax and the balance maintenance charges and repair fund can be shown separately for the purpose of GST. This would help avoid paying the GST completely or reduce the amount of GST payable by the society.
If the society’s maintenance amount is less than Rs 5,000 per member, but if the society’s membership base is large and the total collection exceeds Rs 20 lakh per annum, the society would be liable to pay GST. Such societies can split their buildings to form separate societies so that the collection amount per society does not cross the threshold limit of Rs 20 lakh.
The division of a society into multiple societies may be quite cumbersome and time-consuming, but it would be a good solution to avoid paying the GST.
Input Tax credit for Co-operative Housing Society
A Housing Society will be entitled to ITC in respect of taxes paid by them on capital goods like generators, water pumps, lawn furniture, etc and other goods like taps, pipes, other sanitary and hardware fillings and input services such as repair and maintenance services. In case a housing society carries out maintenance or renovation work and buys commodities such as cement, paint or steel, it can avail the benefit of ITC paid on the tax paid on the purchase of these commodities from the total amount of outward liability under GST.
No ITC will be available for electricity expenses, stamp duty and property tax.
Filing of returns by Co-operative Housing Society
Under GST, all dealers including a Society will have to file GSTR – 1 by 10th of the following month, GSTR – 2 by 15th and GSTR – 3 by 20th of the following month like all other registered entities. Annual Return has to be filled with the form GSTR-9.
Other than these, if they deduct TDS then they will have to also file GSTR-7 by 10th of the following month.