Applicability of GST Law On Co- Operative Housing Societies

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