Services provided by co-operative housing society to its members by collecting society charges is a ‘supply’ liable to GST
Co-operative Housing Societies are entities registered under the co-operative laws of the respective States. According to Section 2(16) of the Maharashtra Co-operative Society Act, 1960, “housing society” means a society, the object of which is to provide its members with open plots for housing, dwelling houses or flats; or if open plots, the dwelling houses or flats are already acquired, to provide its members common amenities and services.
Simply put these are a collective body of persons, who stay in a residential society. As a collective body, they would be supplying certain services to its members, be it collecting statutory dues from its members and remitting to statutory authorities, maintenance of the building, security etc. In this article we will we know whether services provided by co-operative housing society to its members by collecting society charges is a ‘supply’ liable to GST
Compliance requirements for housing societies under GST
If the turnover of housing society is above 20 lakhs, it needs to take registration under GST in terms of Section 22 of the CGST Act, 2017. However, taking registration does not mean that the housing society has to compulsorily charge GST in the monthly maintenance bills raised on its members. Notification No.12/2017 -Central Tax (Rate) dated 28.06.2017 at sr.no.77 provides for the following exemption to housing societies:
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 Goods and service Tax; or
(c) Up to an amount of Seven thousand five hundred 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.
In view of the provision contained at (c) above, a society may be registered under GST, however if the monthly contribution received from members is less than Rs. 7, 500/- (and the amount is for the purpose of sourcing of goods and services from a third person for the common use of its members), no GST is to be charged by the housing society on the monthly bill raised by the society. However, GST would be applicable if the monthly contribution exceeds Rs. 7, 500/-.
Certain statutory dues such as property tax, electricity charges etc. form part of the monthly maintenance bill raised by the society on its members. The question would arise whether such charges should be included while computing the monthly limit of Rs. 7, 500/- in terms of clause (c) of sr.no.77 of notification 12/2017 -Central Tax (Rate) dated 28.06.2017. As per clause (b) of the above exemption, exemption is available to housing societies for provision of carrying out any activity which is exempt from the levy of Goods and Services Tax assuming that a housing society is a non-profit registered entity; and property tax and electricity is exempt from the levy of GST. Thus, charges, collected by the society on account of property tax, electricity charges and other statutory levies would be excluded while calculating the limit of Rs. 7, 500/-.
Further, the question would then arise that if the monthly bill is say Rs. 8,000/- (and the same is on account of services for common use of its members), will GST be applicable on Rs. 8,000/- or Rs.1, 000/-. In such cases, exemption is available up to an amount of Rs. 7,500/ and GST would be applicable on the amount in excess of Rs. 7,500/- TRU videF.No.332/04/2017-TRU released FAQs on levy of GST on supply of services to the Co-operative society and has clarified as under
|The society collects the following charges from the members on quarterly basis as follows: |
1. Property Tax-actual as per Municipal Corporation of Greater Mumbai (MCGM)
2. Water Tax- Municipal Corporation of Greater Mumbai (MCGM)
3. Non- Agricultural Tax- Maharashtra State Government
4. Electricity charges
5. Sinking Fund- mandatory under the Bye-laws of the Co-operative Societies
6. Repairs & maintenance fund
7. Car parking Charges
8.Non Occupancy Charges
9. Simple interest for late payment. From the tax/ charge as listed above, on which GST is not applicable.
|1. Services provided by the Central Government, State Government, Union territory or local authority to a person other than business entity, is exempted from GST. So, Property Tax, Water Tax, if collected by the Co-operative Society on behalf of the MCGM from individual flat owners, then GST is not leviable.|
2. Similarly, GST is not leviable on Non-Agricultural Tax, Electricity Charges etc, which are collected under other statutes from individual flat owners. However, if these charges are collected by the Society for generation of electricity by Society’s generator or to provide drinking water facility or any other service, then such charges collected by the society are liable to GST.
3. Sinking fund, repairs & maintenance fund, car parking charges, Non occupancy charges or simple interest for late payment, attract GST, as these charges are collected by the Co-operative Society for supply of services meant for its members.
Clarification on Issues related to GST on monthly subscription/ contribution charged by a Residential Welfare Association from its members as per circular no. 109/28/2019-GST dated 22-07-2019
|1||Are the Maintenance charges paid by residents to the Resident Welfare Association in a housing society exempt from GST and if yes, is there an upper limit on the amount of such charges for the exemption to be available?||Supply of service by Resident Welfare Association to its own members by way of reimbursement of charges or share of contribution up to an amount of Rs. 7,500 per month per member for providing services and goods for the common use of its members in a housing society or a residential complex are exempt from GST|
|2||A Resident Welfare Association has aggregate turnover of Rs. 20 lakh or less in a financial year. Is it required to take registration and pay GST on maintenance charges if the amount of such charges is more than Rs. 7500 per month per member?||No, if aggregate turnover of an Resident Welfare Association does not exceed Rs. 20 lakh in a financial year, it shall not be required to take registration and pay GST even if the amount of maintenance charges Exceeds Rs. 7,500 per month per member. Resident Welfare Association shall be required to pay GST on monthly subscription/ contribution charged from members only if such subscription is more than Rs. 7,500 per month per member and the annual aggregate turnover of Resident Welfare Association by way of supplying of services is also Rs. 20 lakh or more. (Note)|
|3||Is the Resident Welfare Association entitled to take input tax credit of GST paid on input and services used by it for making supplies to its members and use such ITC for discharge of GST liability on such supplies where the amount charged for such supplies is more than Rs. 7,500 per month per member?||Resident Welfare Association are entitled to take ITC of GST paid by them on capital goods, goods and Input services such as repair and maintenance services.|
|4||Where a person owns two or more flats in the housing society or residential complex, whether the ceiling of Rs. 7,500 per month per member on the maintenance for the exemption to be available shall be applied for residential apartment or per person||As per general business sense, a person who owns two or more residential apartments in a housing society or a residential complex shall normally be a member of the Resident Welfare Association for each residential apartment owned by him separately. The ceiling of Rs. 7,500 per month per member shall be applied separately for each residential apartment owned by him. For example, if a person owns two residential apartments in a residential complex and pays Rs. 15,000 per month as maintenance charges towards maintenance of each apartment to the Resident Welfare Association the exemption from GST shall be available to each apartment|
|5||How should the Resident Welfare Association calculate GST payable where the maintenance charges exceed Rs. 7,500 per month per member? Is the GST payable only on the entire amount of maintenance charges||The exemption from GST on maintenance charges charged by a Resident Welfare Association from residents is available only if such charges do not Rs. 7,500 per month per member. In case the charges exceed Rs. 7,500 per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs. 9,000 per month per member GST at the rate of 18% shall be payable on the entire amount of Rs. 9,000 and not on (9,000 – 7500) = Rs. 1500|
|Annual turnover of RWA||Monthly maintenance charge||Whether exempt?|
|More than Rs. 20 lakhs||More than Rs. 7, 500||No|
|More than Rs. 20 lakhs||Rs. 7,500 or less||Yes|
|Rs. 20 lakhs or less||More than Rs. 7, 500||Yes|
|Rs. 20 lakhs or less||More than Rs. 7, 500||Yes|