K. B. Sanmane & Co.

The Goods and Service Tax has been one of the key things that has caught attention of the market given its implications. Today, India is on the verge of making one of its biggest tax reforms since independence. The most awaited Goods and Service Tax (“GST”) is set to be implemented from 1st July, 2017.

In view of the same, here are some provisions which are relevant for a Co-operative Housing Society.

Applicability of GST Law:

GST is payable on Supply. The word Supply has been defined u/s 7(1) of CGST Act which includes all forms of supply of goods or services or both made for a consideration by a person in course of business. The definition of supply is inclusive hence enabling it for a broader coverage. As per this definition, any supply of goods or services made during the course of business will be chargeable under GST.

The word business which is used in the definition of supply has been defined u/s 2(17) of the CGST Act. Herein, clause (e) of Section 2(17) covers 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.

Therefore, considering the definition of supply as well as definition of business, it is clear that services provided by the Housing Societies to its members are subject to GST.

Taxability:

Services provided by a Co-operative Housing Society to its members were exempted under Service Tax Law. In light of the same, the 14th GST council meeting held on 19th May, 2017 has decided that, certain exemptions which were there under Service Tax law will be continued under GST regime. The exemption is read 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; or

(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

Considering the same, a Co-operative Housing Society, which collects maintenance up to Rs.5,000 per month per member will be exempted from the levy of tax under GST Law.

Tax payable under Reverse Charge:

Normally, tax is payable by supplier of goods or services or both. However, in some cases, the recipient is made liable to pay tax. This is termed as ‘reverse charge‘.

Applicability:

Persons who are required to pay tax under reverse charge are required to be registered, irrespective of the threshold limit specified as per section 24(iii) of CGST Act  i.e. when tax is payable under reverse charge basis, the exemption available to small taxable persons (20 or 10 lakhs) is not available. Therefore, all the persons as defined u/s 2(84) of the CGST Act who receive services chargeable under Reverse Charge as well as who are receiving goods or services from unregistered persons are liable to be registered under the GST Law. Hence, Housing Societies are required to get themselves registered if they are liable to pay GST under reverse charge for receiving goods from unregistered person or if services received as under;

Services under Reverse Charge as approved by the GST council in its meeting held on 19th May, 2017 which are relevant are listed herein below;

Sr. No. Services Provider of service Percentage of service tax payable by service provider Recipient of Service Percentage of service tax payable by any person other than the service provider
1 Taxable services provided or agreed to be provided by any person who is located  in  a non-taxable territory and received by  any person located in the taxable territory other than non-assessee online recipient (OIDAR) Any     person who is located in a non- taxable territory Nil Any person located  in the taxable   territory other than non-assessee online recipient (Business Recipient) 100%
2 Services provided or agreed to be provided by a goods transport agency (GTA) in respect of transportation of goods by road Goods

Transport Agency (GTA)

Nil (b) any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in

(c) any co-operative          society established by or under any law;

100%
3 Services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly An individual advocate or firm of advocates Nil Any business entity 100%
4 Services provided or agreed to be provided by Government or local authority excluding, –

(1) renting of immovable property, and

(2) services specified below-

(i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and  agency services provided to a person other than Government;

(ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

(iii) transport of goods or passengers.

Government or local authority Nil Any business entity 100%

Payment:

The payment under Reverse Charge has to be paid by cash i.e. through electronic cash ledger only.

Author Bio

Qualification: CA in Practice
Company: M/s K. B. Sanmane & Co.
Location: Pune, Maharashtra, IN
Member Since: 27 Jun 2017 | Total Posts: 1

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5 responses to “A Note on Applicability and relevant provisions under GST Law in respect of Housing Societies”

  1. 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.

  2. Srinivas says:

    SEC.9(4) is applicable in case of supply by unregistered supplier to registered person. Therefore, if a Society, if otherwise not required to be registered, need not take registration exclusively for the sake of REVERSE CHARGE mechanism.

  3. CA KIRAN SANMANE says:

    Firstly, GST council has continued exemptions as it is from Service Tax Law. Under Service Tax exemptions, this matter has been clarified by the department vide ‘Departmental Clarification on Club or Association Service’ Circular No.175/01/2014-ST Dated 10.01.2014 wherein it is clarified that, the entire contribution of ‘such members’ whose per month contribution exceeds Rs.5000 would be ineligible for exemption. i.e. tax would be chargeable to only such member’s whose contribution exceeds exemption limit.
    In addition to this, it must be noted that, benefit of basic exemption of Rs.20 lakhs will be allowed and while calculating threshold limit, value of services which are exempt i.e. total amount of contribution received from members contributing below Rs.5000 per month should not be considered.
    Therefore, in my opinion there will be no tax on members contributing below Rs.5000 per month and in case of members contributing more than Rs.5000 per month tax would be liable tax if total amount of contributions from members contributing more than Rs.5000 per month (taxable value of services) exceeds threshold limit of Rs.20 lakhs for the year.

  4. V VENKATA KRISHNA says:

    If a Society is collecting charges on the basis of superbuilt area and some of the members are paying less than Rs.5000 per month and some member above Rs.5000 will the members paying less than Rs.5000 pm are required to pay GST also on the amount being paid

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