APPLICABILITY OF GST RULES TO CO- OPERATIVE HOUSING SOCIETIES- MADE SIMPLE FOR MEMBERS AND MANAGEMENT COMMITTEE.

Introduction:- This article has been written with a view to increase awareness of members of Housing Societies and Management Committee towards registration requirements and the services which are exempted and which attract GST. An attempt has been made to analyze the terms used in various sections of GST Act and provide some insight into its applicability to Housing Societies.

1. GST is applicable to every person or entity dealing in supply of goods & services &. it includes a Co operative society registered under any law. (Section 2(84)(i) of GST Act)

2. What is Co operative Society:- Co operative society is a  society that works on joint ownership principle. Society is the owner and members have certain shares. Co operative society is governed by State Co operative Act or by Multi state Co Operative Society act 2002. Types of co operative society are- Housing Co operative societies, Social Co operatives and Co operative Banks etc.

Thus, by virtue of definition, housing society is also a person for the purpose of GST .

3. Activities of Housing Society –

Following are the major activities of housing societies  :-

(a) Formation of society on completion of building .

(b) Allotment of shares

(c) Collect contribution from members for maintenance of building & premises.

(d) Collection of property Tax from members & remitting it to Local Body / Municipality / Municipal Corporation.

4. Services provided by Housing Society comes under perview of GST Act:- Housing Co operative Society provides services to its member by way of providing facilities ie housekeeping, security, premises maintenance etc. These activities of providing services to members and collecting maintenance charges is considered as business under (Sec 2(17)(e) of GST Act.

5. REGISTRATION OF SOCIETY UNDER GST

Section 22 (1) of CGST Act states that every supplier of services shall be liable to registered under this Act if his Aggregate turnover in a financial year exceeds Rs. 20 lakh.

Housing Co Operative Society is liable to be registered if Aggregate turnover of Housing Society exceeds Rs. 20 Lakhs AND monthly receipts from members towards Society maintenance charges exceeds Rs. 5000/- per person

6. AGGREGATE TURNOVER OF HOUSING SOCIETY :

Turnover receipts of the Housing Societies includes society maintenance charges from its members, receipts from investments, income receipts from advertisement board, receipts from mobile towers in premises, Share transfer fee from members, receipts from special purpose use of common area by member (marriage function etc) etc.

Housing Society is liable to register if total of all the receipts (including exempted receipts) exceeds Rs. 20 Lakh in a financial year

7. Housing Society’s maintenance bills includes four types of receipts from members:-

(a) Receipts towards services provided for common use of its members. (i.e housekeeping charges, lift maintenance, common area security etc)

(b) Receipts towards services to members for specific purpose. (use of terrace, garden for functions such as birthday, marriage etc)

(c) Receipts from members for onward remittance to Local Body Authorities. (Property Tax etc)

(d) Receipts from members for exempted services under GST Act.( Water Charges )

8. RECEIPTS FROM  MEMBERS FOR COMMON FACILITIES  :-

(a) Maintenance and Repair Charges:- It is the amount collectively reimbursed to the society to upkeep and maintain the building and premises on regular basis. This includes payment made towards electricity for common area,  Security charges and other Administrative expenditure incurred by the Housing Society.

(b) Sinking Fund / Building Funds:- Sinking fund is the collection of amount from each member for creating fund to provide for sum of money required for reconstruction of building in future. Therefore it will be treated as service and will be taxable on receipt basis. Since it is contribution from members for common purpose, it will be considered towards exemption limit of Rs 5000/-

(c) Non Occupancy Charges:- Non Occupancy charges levied by a housing society only when a flat or unit is let out by its member. Since it is a type of contribution for providing common services, it will be considered towards exemption limit of Rs 5000/-.

(d) Parking Charges:- Parking charges are levied to regulate the parking place among st the members and providing space by use of vacant land belonging to the society for a consideration. Since it is also one type of contribution from members for meeting common expenditure. it will be considered towards  exemption limit of Rs 5000/-

(e) Club house, Swimming Pool Charges:- These are specific services by the society to the members opting for such facility and it will be considered towards exemption limit of Rs 5000/-

Total sum of Receipts up to Rs. 5000/- per person, per month from services provided by the Housing Societies  indicated at Para 8 (a to e) above are exempted from levy of GST

9. RECEIPTS FROM MEMBERS TOWARDS SERVICES NOT EXEMPTED UNDER GST   :-

Following receipts from  members are not for common use and hence not eligible for exemption under GST (vide entry 77 of notification 12/2017 dated 28 June 2017.) :-

(a) Share Transfer Fee charged for transfer of shares.

(b) Interest and late fee for default in payment of monthly outgoing by members.

(c) Payments received from members for use of common area. (use of terrace, garden for functions such as birthday, marriage etc)

Any other receipt against services provided by society to its member which is not for common purpose.

10. PROPERTY TAX & WATER CHARGES

(a) Property Tax:- Collection of property tax is statutory levy by a Municipal Corporation or a local Authority. It is levied on per sq ft basis and the owner of the property is liable to pay the same. A society is the mere collection agent and pays the tax collected from members to the Authorities. Under GST Act, services by pure agent is not taxable and housing society collects and remit property tax as pure agent. Therefore, Property Tax receipts are not taxable in the hands of housing society.

(b) Water Charges:- Housing society provides pipeline to deliver water to the member’s premises. Local bodies issues water charges bills in the name of Society and society collects it from members and pays it to Local Body. Water Charges  is not taxable under GST. 

11. CRITERIA FOR REGISTRATION BY A SOCIETY UNDER GST .

A Co operative Housing Society is liable to register under GST Act if following two criteria are fulfilled by it :-

(a) Contribution per month per member:– A Housing Society is liable to register if monthly contribution per month per member exceeds Rs 5000/-. Monthly contribution consists of sum of items indicated at Para 8 (a to e) above.

(b) Aggregate Receipts:- A Housing Society is liable to be registered under GST Act if aggregate receipts exceeds Rs 20 Lakhs in a financial year. The aggregate receipts include receipts of all the exempted and taxable categories.

In order to amplify these criteria, illustrations of  four examples, tabulated below  would help :-

Amount in Rupees

Examples
Total annual  receipts  from members where Maintenance Charges per member per month upto Rs 5000/-
Receipts from from members where Maintenance Charges per member per month more than Rs 5000/-
Exempted Receipts  i.e. Interest from Fixed Deposit Receipts
Taxable Receipts  ie Mobile Tower Rent
Aggregate Total Receipts
Registration Required. Yes/ No
GST to be levied on
Remarks
1
2
3
4
5
6 (2+3+4+5)
7
8
9
I
16,00,000
NIL
5,00,000
NIL
21,00,000
NO
NA
Note 1
II
13,00,000
2,00,000
5,00,000
NIL
20,00,000
NO
NA
Note 2
III
16,00,000
NIL
NIL
5,00,000
21,00,000
YES
5,00,000
Note 3
IV
13,00,000
2,00,000
5,00,000
5,00,000
25,00,000
YES
7,00,000
Note 4

Note 1:- Though Aggregate receipt exceeds threshold limit of Rs 20 Lakhs, yet society is not liable to be registered as its total receipts are from exempted source (As per section 23 of GST Act- a person is not liable to be registered if he is engaged exclusively in the business of supplying goods or services that are not liable to tax or wholly exempt from tax under this Act.

Note 2 :- Though maintenance charges exceeds exempted limit of Rs 5000/- per month per person, Aggregate total receipts is less than threshold limit of Rs 20 L, hence registration is not required

Note 3:- Aggregate receipt exceeds threshold limit of Rs 20 L & includes receipts from taxable category . Registration is required though GST will be levied on only taxable receipt ie Rs 5,00,00/-@ 18%

Note 4: Aggregate turnover exceeds threshold limit of Rs 20 L and it consists of taxable receipts, hence registration is required. GST will be levied only on taxable component ie of Rs 7,00,000/- consisting 2,00,000/- (maintenance charges above Rs 5000/- per month )and taxable receipt of Rs 2,00,000/-

Conclusion:- An effort has been made to bring out clarity regarding the applicability of GST to Housing Co Operative Society’s registration requirements and taxable & exempted services in easy to understand fashion.

Any further queries , clarifications – assistance can be given to those who seek. The same may be e-mailed to 1706 anita@gmail.com

Author Bio

Qualification: CA in Job / Business
Company: BHARAT ELECTRONICS LIMITED
Location: MUMBAI, Maharashtra, IN
Member Since: 17 Aug 2017 | Total Posts: 7
I am a Chartered Accountant with 23 years of experience in Accounts , Direct Indirect Tax with expertise in GST related issues View Full Profile

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17 responses to “Applicability of GST Law On Co- Operative Housing Societies”

  1. Mira Desai says:

    Exemption of Rs 7500 is not applicable to Commercial unit, what if Society has Both type of unit commercial as well as Residence do we need to collect GST from commercial unit who’s maintenance is less than Rs 7500 per month ?

    What is the Situation when Suppose in one month Maintenance is exceed Rs 7500 and Next month it is less than Rs 7500 in this case how GST will be charge do we need to charges GST in month when exceed Rs 7500 and No GST will be charge when it is not exceeding Rs 7500

    Can GST be charges on Water Tax and Property Tax which are collected from commercial unit ?
    Please reply

  2. Ganapati Bhat says:

    Thanks for an informative article. We are a Condominium of Apartment owners. Even today builder has not handed over the management. He charges 3900 Rs. per month as maintenance charges and is now saying that as we are a condominium and not a society GST would be applicable on maintenance charges. Is it correct?

  3. Rohit Gupta says:

    Great article! Just what I was looking for as we recently faced this situation in our society.
    Just some food for thought.. The 7500 per month clause wont be any relief for the resident if the CHS decides to hire a maintenance company for all of its maintenance work.. The maintenance company will anyways charge GST on the invoice and this cost will be passed on to the residents eventually if not in the form of separate GST..

  4. abdullah says:

    we are collecting rs 250/- in monthly five equal installments for major repair funds,

    1)will gst be applicable on the installment received or total amt received at the end.?

    2)and also guide us is there any other way we can do this?

  5. CA Madhumita says:

    Very nicely written article

  6. Mahesh says:

    Madam,
    Exemption of Rs 5000 is not applicable to Commercial unit, what if Society has Both type of unit commercial as well as Residence do we need to collect GST from commercial unit who’s maintenance is less than Rs 5000 per month ?

    What is the Situation when Suppose in one month Maintenance is exceed Rs 5000 and Next month it is less than Rs 5000 in this case how GST will be charge do we need to charges GST in month when exceed Rs 5000 and No GST will be charge when it is not exceeding Rs 5000

    Can GST be charges on Water Tax and Property Tax which are collected from commercial unit ?

  7. CA NARENDRA SEKSARIA says:

    1-V GOOD SIMPLE ARTICLE FOR BENEFIT TO ALL-THANKS FOR EFFORTS-I WILL LIKE TO SHARE FEW IMP LAW POINTS/MY VIEWS-STUDY

    2-I SAY GST IS NOT APPLICABLE TO CO OP HOSG SOC—ENCL MY NOTES/SEPARATE E MAILS

    3-ELECTRICITY CHARGES RECD-A BIG AMT–ELECTRICITY IS GOODS-BUT NOT TAXABLE-NOT EXEMPT-NOT 0 RATED-IN GST BUT EXCLUDED-FROM GST

    -HENCE THIS AMT CAN NOT CONSIDERED FOR REGISTRATION-AND SO TAXABILITY

  8. vswami says:

    OFFHAND
    The discussion , it is seen, does not cover the aspect of ‘ principle of mutuality’ ; which, in personal perspective, could be rightly invoked and forcefully urged, with possible eventual success against the attempted levy of service tax on housing societies, by whatever name called.
    The writer may do well consider to and go through the thoughts/viewpoints repeatedly shared on this website itself; so also on Facebook/ LInkedin.

  9. PRADEEP BANTHIA says:

    Appreciated!!
    A class brief on Co-Op Hsg GST taxability
    Thanks

  10. Asif Syed says:

    Useful information

  11. R P. Mody says:

    Taxable turnover in example numbers 3 and 4 would be Rs. 100000/- and Rs. 500000/-, respectively,after taking the benefit of basic thrash-hold limit of Rs. 20,00,000/- and not Rs 500000/- and Rs.700000/- as suggested in the Article.

    • CA Anita Bhadra says:

      Dear Sir ,
      Rs. 20 Lakh limit is for ascertaining registration requirement and GSt liability .
      GST @ 18 % will be levied on gross taxable income and not on difference turnover receipt.

      Regards

  12. Lakshmanan S. says:

    We have 114 Units in our Apartment. All of us are paying less than Rs.5000 per month as maintenance charge. Our total Annual Income is expected to be about Rs.44.28 Lakhs which is above the Threshold Limit of Rs.20 Lakhs. Please let us know whether GST is applicable for us. We are confused as the opinions are different.

    • CA Anita Bhadra says:

      Sir ,
      In my opinion , Since maintenance charges per person , per month is less than Rs. 5000/-
      Your Apartment is not liable to be registered under GST Act , and GST rules are not applicable

    • vswami says:

      OFFHAND
      In order to elicit a better reply, from the writer or anyone else, furnishing an item-wise, indicating nature of, collections from members comprising “the total income of Rs 44.28 Lakhs”.
      Incidentally, it may be noted, but for the ‘principle of mutuality’ open to be relied upon for claiming exemption from service tax, also the question of liability to income-tax could arise, hence needs to be of concern !

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