Co-operative Housing Societies are registered under the co-operative Society laws of the respective States. According to Section 2(16) of the Maharashtra Cooperative Society Act, 1960, “housing society” means a society, the object of which is to provide its members with open plots for housing, residential houses or flats; or if open plots, the dwelling houses or flats are already acquired, to provide its members common amenities and services. This is simply a group of persons, who stay in a residential society. As a collective body, they would be providing certain services to its members, be it collecting statutory dues from its members and remitting to statutory authorities, maintenance of the building, security etc.
Co-operative Housing Societies – whether liable to levy of GST
A Society is similar to a club, which is composed of Society to its members. So, service provided by a Co-operative Housing Society to its members can be treated as service provided by one person to another? The answer is yes. The following points of the GST law will make the position clear.
As per Section 9 of CGST Act, 2017, levy of GST is on supply of goods and services. As per Section 7 expression
- (a) all types of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made in the course or furtherance of business for a consideration by a person;
The definition of “person” in Section 2(84) (i) of the CGST Act, 2017 specifically includes a co-operative society registered under any law relating to co-operative societies. Thus a registered co-operative housing society is a person within the meaning of the term in the CGST Act.
Now the question arises is whether the activity of the society or services provided by society can be said to be in the course or furtherance of business? As per section 2(17) of the CGST Act, 2017 the definition of business is as under
- (a) any trade, commerce, profession, vocation, adventure, manufacture, wager or any other similar activity, whether or not it is for a pecuniary benefit;
- (b) any transaction or activity in connection with or incidental or ancillary to sub-clause (a);
- (c) any transaction or activity in the nature of sub-clause (a) whether or not there is volume/quantity, frequency, continuity or regularity of such transaction;
- (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
- (e) provision of the facilities or benefits to its members by a club, association, society, or any such body (for a subscription or any other consideration) ;
- (f ) admission to any premises for a consideration of persons ;
- (g) services supplied by a person as the holder of an once which has been accepted by him in the course or furtherance of his trade, profession or vocation;
- (h) services provided by way of totalisator or a licence by a race club to book maker in such club ; and
- (i) any transaction or activity undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.
Thus, as per section 2(17)(e) of the CGST Act, 2017 provision of the facilities or benefits to its members by a club, association, society, or any such body (for a subscription or any other consideration) is deemed to be a business. So the activities/ services of the housing society would thus attract the levy of GST (Goods & Service Tax) and the housing society would be required to register and comply with the GST Law.
If the turnover of housing society exceeds 20 lakhs, it needs to take registration under GST in terms of Section 22 of the CGST Act, 2017. However, taking registration does not mean that the housing society has to compulsorily charge GST in the monthly maintenance bills raised on its members. Notification No.12/2017 -Central Tax (Rate) dated 28.06.2017 provides for the following exemption to housing societies:
Service provided 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 / services which is exempt from the levy of Goods and service Tax; or
- (c) up to an amount of five thousand rupees (Rs. 5000) 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
In view of the provision contained at (c) above, a society may be registered under GST, however if the monthly contribution received from members is less than Five Thousand Rupees (Rs.5,000/-), no GST is to be charged by the co-operative housing society on the monthly bill raised by the society. However, GST would be applicable if the monthly contribution is in excess of Rs.5, 000/-.
Certain statutory dues such as electricity charges, property tax etc. form part of the monthly maintenance bill raised by the society to its members. But whether such charges should be included while computing the monthly limit of Rs.5000/- in terms of clause (c) of notification 12/2017 -Central Tax (Rate) dated 28.06.2017. As per clause (b) of the above exemption, the exemption is available to housing societies for provision of carrying out any activity which is exempt from the levy of GST assuming that a housing society is a non-profit registered entity; and property tax and electricity is exempt from the levy of GST. So Charges collected by the housing society on account of property tax, electricity charges and other statutory levies would be excluded while calculating the limit of Five Thousand Rupees Rs.5,000/-.
Further,if the monthly bill is say Six Thousand Rupess (Rs. 6,000/-) , will GST be applicable on Rs. 6,000/- or Rs.1,000/-. In such cases, exemption is available up to an amount of Five Thousand Rupees (Rs.5,000/) and GST would be applicable on the amount in excess of Rs.5,000/-
Tax Research Unit vide F.No.332/04/2017-TRU released FAQs on levy of GST on supply of services to the Co-operative society and has clarified as under.
|The Housing society collects the following charges from the members on quarterly basis as follows: |
1. Property Tax - actual as per (MCGM) Municipal Corporation of Greater Mumbai
2. Water Tax- Municipal Corporation of Greater Mumbai
|1. Services given by the Central Government, State Government, Union territory or local authority to a person other than business entity, is exempted from GST. So, Property Tax, Water Tax, if collected by the Resident Welfare Association / Co-operative housing Society on behalf of the MCGM from individual flat owners, then GST is not leviable.|
|3. Non- Agricultural Tax- Maharashtra State Government |
4. Electricity charges
|2. Similarly, GST is not leviable on Electricity Charges, Non-Agricultural Tax etc, which are collected under other statutes from individual flat owners. |
However, if these charges are collected by the Housing Society for generation of electricity by Co-operative Housing Society’s generator or to provide drinking water facility or any other service, then these type of charges collected by the society are liable to Goods and Service Tax.
|5. Sinking Fund - Fund is Mandatory under the Bye-laws of the Co-operative Societies |
6. Repairs & maintenance fund
7. Car parking Charges
8. Non Occupancy Charges
9. Simple interest for late payment.
Apart from the taxes/ charges as listed above, on which GST is not applicable.
|3. Sinking fund, repairs & maintenance fund, Non-occupancy charges, car parking charges, attract Goods and service tax, as these charges are collected by the Resident Welfare Association / Co-operative Society for supply of services meant for its members.|
The following persons shall not be liable to registration as per Section 23(1) of the CGST Act, 2017, namely:––
- (a) any person engaged exclusively in the business of services or supplying goods or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;
- (b) an agriculturist/former, to the extent of supply of produce out of cultivation of land.
Thus, if the turnover of the society is lower than Rs.20 Lakh or even if the turnover is above Rs. 20 lakhs but the monthly contribution of individual members towards maintenance is less than Five Thousand Rupees (Rs.5000/-) (such services being exempt) and the society is providing no other taxable service to its members or outsiders then the co-operative housing society (essentially exclusively providing wholly exempt services) & need not required to take registration under GST.
Whether activities of Co-operative Housing Societies would become more expensive under GST ?
No. In the press release dated 13.07.2017, it has been clarified as under:
There are some press reports/Release that states about services provided by a co-operative Housing Society [Resident Welfare Association (RWA)] will become expensive under GST. These are completely unsubstantiated.
It may be mentioned that supply of service by Resident Welfare Association (unincorporated body or a registered non- profit entity) to its own members by way of reimbursement of charges or share of contribution up to an amount of five thousand rupees (Rs 5000) per month per member for providing services and goods for the common use of its members in a co-operative housing society or a residential complex are exempt from GST.
Further, if the aggregate turnover of such Resident Welfare Association is below Rs.20 Lakh in a financial year, then such supplies would be exempted from GST even if charges per member are more than Rs. five thousand.
Resident Welfare Association (RWA) shall be required to pay GST on monthly subscription/contribution charged from its members if such subscription is more than Five Thousand Rupees (Rs. 5000) per member and the annual turnover of Resident Welfare Association by way of supplying of services and goods is also Rs. 20 lakhs or more. Under GST, the tax burden on Resident Welfare Association will be lower for the reason that they would now be entitled to ITC in respect of taxes paid by them on capital goods (generators, lawn furniture, water pumps etc.), goods (pipes, taps, other sanitary/hardware fittings etc.) and input services such as repair and maintenance services. ITC of Central Excise and VAT paid on goods and capital goods was not available in the pre-GST period ( Vat and service tax era ) and these were a cost to the Resident and Welfare Assocation. Thus, there is no change made to services provided by the Resident Welfare Society (RWA) to its members in the GST period.
The tax burden under GST will be lower as the co-operative housing society would be entitled to take ITC which was hitherto not allowed under service tax. Moreover, the exemptions given ensure that there would be no tax burden on smaller co-operative housing societies where the monthly contribution of the individual members does not exceed Rs.5, 000/-. In a nutshell GST will be a favorable tax regime for housing societies viz a viz service tax.