Authored by CA. Lawanya Sridharan, MyGate
Central Goods and Services Tax is an indirect tax to be paid by end users for the consumption of goods and services. It was implemented in 2017 and it applies not just to individuals and corporations, but to housing societies as well, with exceptions, of course.
To understand in depth the correct eligibility criteria for a housing society’s liability towards GST, here’s a comprehensive guide which covers all essential information and facts you need to know about compliance with GST rules.
Definition and inclusion provision under the Act
|CGST Act 2017 Section 7||“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 by a person in the course or furtherance of business.”|
|CGST Act 2017 Section 7 And Section 2 (17 e)||States “business” as “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.”|
As per Section 22, if the turnover of the housing society is over ₹20 lakh and/or it levies more than ₹20 lakh in aggregate annual maintenance charges in a financial year, it needs to take registration under GST laws and obtain a registration number, but the payment of GST depends on other parameters (covered below).
However, there are exceptions for Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand, where the threshold limit for registration liability is ₹10 lakh.
Criteria for applicable GST payment
However, there is an exemption if the annual aggregate turnover of the housing society is not over ₹20 lakh.
Thus, for GST to apply, two criteria must be met.
|Annual turnover of a housing society||Monthly maintenance charge/per unit/per member||GST|
|₹20 Lakh or less||₹7500 or less||Exempt|
|₹20 Lakh or less||More than ₹7500||Exempt|
|More than ₹20 Lakh||₹7500 or less||Exempt|
|More than ₹20 Lakh||More than ₹7500||Applicable|
Furthermore, GST doesn’t apply on the difference amount alone. For example, if the monthly maintenance bill is ₹9000, GST will apply on the entire amount, not just on ₹1500.
Property Tax, Water Tax, Municipal Tax, Non-Agricultural Land Tax paid to the state are exempt from GST.
Sinking Fund, Maintenance and Repair Funds, Car Parking funds, Non-Occupancy Funds – all if collected as part of maintenance and not as deposits, interest from late payments, are not exempt from GST since they are considered charges collected by the society for the supply of services to members.
Input Tax Credit
Housing Societies will avail the benefits of ITC which means they will receive a tax deduction if they pay taxes on:
However, for them to avail this benefit, the reverse charge mechanism will apply on all goods and services received by suppliers; the set-off can be claimed against the tax liability for maintenance funds. This benefit is available if the amount charged for these supplies is over ₹7500 per member.
A housing society can impart the benefits of Input Tax Credit by lowering the maintenance charges for members, the amount of which can be determined after proper cost analysis and comparison of output/input tax amounts against overall expenses and income.
Periodic Filing and Compliance Rules
A housing society has to file 37 returns, three returns per month which include:
As well as
If a housing society deducts TDS, then they have to file GSTR7 by the 10th of the following month. Housing Societies do not fall under the Composition Scheme.
MC/RWA are expected to maintain proper records of all Supply and Expense reports for 72 months for auditing purposes.
Frequently Asked Questions
1. If a society’s monthly maintenance bill is over ₹7500 but the annual aggregate turnover is less than ₹20 lakh, does GST apply?
2. Do GST exemption of ₹7500 and ₹20 lakh turnover threshold apply even if the apartment is used for commercial purposes?
Yes. GST exemption and application applies to property used for commercial purposes.
3. Does a society have to pay GST to outside vendors for their services even if the society meets the exemption criteria?
Yes. If the vendor’s services fall under GST rules, the society has to pay as per the percentage applied. E.g., GST payable for contractor services.
4. If a person pays ₹5000 as monthly maintenance bill for owning one flat, and ₹8000 for another flat in the same society, how does GST apply?
In this case, GST applies only on the second apartment for which the maintenance is ₹8000.
5. How does this affect maintenance bill/other bill formats?
The society has to add GST to the monthly, quarterly, yearly invoice and mention the GSTIN No on all invoices where applicable.
6. What forms are to be used for monthly filing?
Monthly GST forms are GSTR 1, GSTR 2, GSTR 3.
7. On what repair and maintenance services is Input Tax Credit allowed?
On services such as lift AMC, Housekeeping, Security, Fire AMC, Contracting Staff, Accounting and Auditing Services, etc.
8. What should be excluded while calculating the limit of ₹7500?
Property tax, electricity charges collected from individual flat owners and other statutory levies are excluded.
9. What should be included while calculating the limit of ₹7500?
Water/electricity charges for common areas and common services like clubhouse, swimming pool, along with parking charges, common property tax, payments for repair and maintenance, security, admin, accounting, Non Occupancy charges.
10. Are share transfer fees/ interest on late payment included in the limit of ₹7500?
No. Share Transfer Fees are taxable but not included in the ₹7500 limit as no third party is involved. Similarly, interest on default is an individual charge, so it’s taxable, but not covered under the limit of ₹7500.
11. What if there are two co-owners for a single flat? How is the ₹7500 threshold applied here?
The ₹7500 threshold applies per flat irrespective of the number of owners for a single flat.
12. Should GST be collected from all members once the threshold of ₹20 Lakhs and ₹7500 both are crossed?
GST has to be collected only from those members, whose monthly maintenance charges exceed ₹7500 per month.