Introduction
GST is the most logical steps towards the comprehensive indirect tax reform in our country since independence. GST is leviable on all supply of goods and provision of services as well combination thereof. All sectors of economy whether the industry, business including Govt. departments and service sector shall have to bear impact of GST. All sections of economy viz., big, medium, small scale units, intermediaries, importers, exporters, traders, professionals and consumers shall be directly affected by GST… One of the biggest taxation reforms in India – the Goods and Service Tax(GST) — is all set to integrate State economies and boost overall growth. GST will create a single,unified Indian market to make the economy stronger. Experts say that GST is likely to improve tax collections and Boost India’s economic development by breaking tax barriers between States and integrating India through a uniform tax rate. Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions.
GST is one indirect tax applicable in the entire nation, which eliminates multiple tax entities and
consolidates into a single tax entity. A lot has been spoken and written about in various forums
about whether housing societies would be in the purview of GST. Regarding which Central
Government has answered FAQ’s, clearing doubts about implication of GST on housing societies
upon which understanding on taxability of tariffs has been made.
Under GST Act, activities of a co-operative society are also treated as a business activity and
hence all provisions of GST shall be applicable to co-operative societies as any other business
(excluding wherever specified).
Applicability
- 1. Applicability: As per Section 2(17) (e) of CGST Act “business” includes, (e) 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.
- 2. Registration: As per section 22(1) of CGST act, Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees.
- 3. Aggregate Turnover: As per Section 2(6) of CGST Act, “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.
As per above in respect of society, aggregate turnover would include collection made from members and any other income excluding interest from banks.
Case–wise GST Applicability Table
ase | Condition | Liable to take registration | |
Aggregate Turnover | Common Maintenance per member per month | ||
I | Less than Rs. 20 lacs | Less than Rs. 7500 | NO |
II | Less than Rs. 20 lacs | More than Rs. 7500 | NO |
III | More than Rs. 20 lacs | Less than Rs. 7500 | YES* |
IV | More than Rs. 20 lacs | More than Rs. 7500 | YES |
*As society provides some specific services which are liable to GST like transfer fees, charges for renting of common space to members and third party, advertisement etc., therefore registration is to be taken even though all members are charged common maintenance below Rs. 7500.
Taxability and Exemptions
- 4. Transaction Value: As per section 15(2) of CGST Act, The value of supply shall include:
(a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act.
(b) interest or late fee or penalty for delayed payment of any consideration for any supply.
As per above, Transaction Value would include any amount charged to the members or third party except for those which are specifically exempted.
- 5. Exemption: As per Heading 9995 of Notification No. 12/2017 dated 28/06/2017 of CGST Act,
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 –
As per above, exemption of Rs.7500 would include only service charge or fund collected from members for sourcing of Goods and Services from third party for common use. However, Penalty, interest for late or non- payment, Membership fees, Transfer Premium and any other member specific charges are not collected as reimbursement or share of contribution, hence same cannot enjoy benefit of exemption.
Also, as specified, exemption of Rs.7500 would be available only to HOUSING SOCIETIES and RESIDENTIAL COMPLEX.
Taxability of tariffs
(understanding as per CBEC FAQ No. 332/04/2017)
Tariffs | Comments | Taxability under GST Yes/ No | Eligibility for Rs. 7500 exemption Yes/No |
Taxes:
| |||
1. Property Tax | Property Tax, if collected by the Co-operative Society on behalf of the MCGM from individual flat owners, then GST is not leviable. | No | Not taxable |
2. Water Charges | Water Tax, if collected by the Co-operative Society on behalf of the MCGM from individual flat owners, then GST is not leviable. | No | Not Taxable |
3. Electricity Charges collected under any statute from individual flat owners (for purpose other than common usage / providing service) | As per CBEC FAQ No. 332/04/2017, GST is not leviable on Electricity Charges which are collected under other statutes from individual flat owners. However, electricity charges collected by the society are liable to GST, if these charges are collected by the society for, i) generation of electricity by Society’s generator or ii) to provide any other service, | No | Not Taxable |
4. Non-Agricultural Tax | If collected by society on actual basis, then GST is not leviable. | No | Not Taxable |
Common Maintenance Charges (Reimbursement of expenses and share of contribution): | |||
1. Maintenance and Service Charges | Services to members are taxable if the amount of collection is more than five thousand rupees per month per member for sourcing of goods or services | Yes | Yes |
2. Electricity Chagres | As per CBEC FAQ No. 332/04/2017, if electricity charges are collected by the Society for any other service, then such charges collected by the society are liable to GST. | Yes | Yes |
3. Parking Charges | Since there is an element of service in it GST is applicable | Yes | Yes |
4. Non-Occupancy Charges | Since it is a type of contribution for providing common services. |
|
|
5. Sinking Fund | As per CBEC FAQ No. 332/04/2017, Sinking Fund is collected by society for supply of services meant for its members. | Yes | Yes |
6. Repair Fund | As per CBEC FAQ No. 332/04/2017, Repair Fund is collected by society for supply of services meant for its members.
| Yes | Yes |
Member Specific Charges: | |||
Share Transfer Fees & Premium, Membership Fees, Interest or Penalty etc. | These are considered as service provided to members or additional revenue to society for benefit of its members. | Yes | NO |
Other Specific Services: | |||
Common area usage, advertisement, tower rent etc. | These are society’s own specific services provided to members or third party. | Yes | NO |
Input Tax Credit and Reverse Charges Mechanism
- 6. Input Tax Credit for society: As per Section 17(5) of CGST Act, input tax credit shall not be available in respect of the following supply of goods or services or both—
(b) food and beverages, outdoor catering, beauty treatment, health services.
(c) works contract services when supplied for construction of an immovable property.
(d) goods or services or both received by a taxable person for construction of an immovable property.
Explanation – For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property.
As per above, GST paid on food and beverages, outdoor catering and works contract services and goods and services procured for construction i.e. re-construction, renovation, additions or alterations or repairs, to the extent of capitalization of immovable property would not be allowed as Input Tax Credit.
- 7. Input Tax credit for Members: Members having GST registration can claim ITC of GST charged to them only if such member has registered their flat address as place of business or additional place of business in their GST.
- 8. Reverse Charge Mechanism (RCM):
- Compulsory RCM: As per Notification 13/2017, following are the services on which society has to pay GST under RCM
as per applicable rates,
- Services from Goods Transport Agency
- Legal services from Advocate or firm of advocates.
- Purchase of goods or services from Unregistered Dealer (URD): As per section 9(4) of CGST Act and Notification No.
8/2017 of GST, If a society purchases goods or services for aggregate value exceeding Rs. 7500 in a day from unregistered dealers, then GST shall be paid by society on whole value under RCM basis.
ADMINISTRATIVE ANAMOLIES
- 1. Registered society would need to charge GST compulsorily on member specific charges even if such member is being charged Common maintenance charges below 7500. E.g. Share Transfer Fees & Premium, Membership Fees, Interest or Penalty, Common area usage, Advertisement, Tower rent etc.
- 2. As per section 24(iii) of CGST Act., if a society avails any compulsory RCM service then such society would require taking registration and pay GST on RCM services availed, even if aggregate turnover of such societies for a financial year is below R 20 lacs.
Disclaimer: This information is as per our understanding of GST at this point of time and clarification as per FAQ No. 332/04/2017 of CBEC regarding GST on Co-operative Societies. Shiv Consultancy doesn’t undertake any liabilities for actions/non-actions taken by societies basis any views expressed herein.
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