GST On Charges Collected By Co-Operative Housing Society

In a residential society, various charges are collected from its members to cover the expenses associated with maintaining and managing the common facilities and services provided within the community. These charges may vary from one society to another, but they typically include maintenance charges, parking charges, water and electricity charges, clubhouse and amenity charges, property tax, transfer fees, interest and late fees, legal and professional fees, and repair and maintenance charges.

This article explores the taxability of charges collected by housing society from its members, the registration requirements for housing societies under GST, and the compliance measures they need to follow.

DEFINITIONS UNDER THE GST ACT WHICH ATTRACT TAXABILITY TO THE CO-OPERATIVE HOUSING SOCIETIES:

Extracted provision of CGST ACT, 2017 are reproduced as below:

Section 2(17) of CGST Act -Definition of the term ‘Business’  "business" includes –

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(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;

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Section 2(84) of CGST Act -Definition of the term ‘Person’

 "Person" includes-

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(I) a co-operative society registered under any law relating to co-operative societies;

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Section 7 of CGST Act –Scope of Supply

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(1) For the purposes of this Act, the expression - "supply" includes-

(a) all forms 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 for a consideration by a person in the course or furtherance of business;

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Considering the above definitions it becomes evident that a cooperative housing society qualifies as a person and providing facilities and services to its member will fall in to the definition of business. Consequently, any charges collected by the society from its members for services or facilities offered fall within the definition of "Supply" under Section 7(1)(a) of the CGST Act.

REGISTRATION REQUIREMENT:

Aggregate Turnover > Rs.20 lakh, Cooperative Societies become liable for GST registration as per sec 22(1).

EXEMPTION AVAILABLE TO HOUSING SOCIETES:

Clause (c) of Sl. No. 77 to the notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 as amended vide notification No. 2/2018- Central Tax (Rate), dated 25.01.2018

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 Goods and service Tax; or 

(c) up to an amount of seventy five hundred 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.

Prior to 25th January 2018, the exemption was available if the charges or share of contribution did not exceed Rs.5000/- per month per member. The limit was increased to Rs.7500/- per month per member with effect from 25th January 2018.

A number of issues have been raised regarding the GST payable on the amount charged by a Residential Welfare Association for providing services and goods for the common use of its members in a housing society or a residential complex.

The same have been examined and are being clarified below:

GST Exemption for RWA Services to Members: Supply of service by RWA (unincorporated body or a non- profit entity registered under any law) to its own members by way of reimbursement of charges or share of contribution up to an amount of Rs.7500/- per month per member for providing services and goods for the common use of its members in a housing society or a residential complex are exempt from GST.

GST Registration Exemption for RWAs with Turnover Below Rs. 20 Lakh : If aggregate turnover of an RWA does not exceed Rs.20 Lakh in a financial year, it shall not be required to take registration and pay GST even if the amount of maintenance charges exceeds Rs.7500/- per month per member.

GST Liability for RWA Monthly Subscriptions and Input Tax Credit (ITC) Eligibility: RWA shall be required to pay GST on monthly subscription/ contribution charged from its members, only if such subscription is more than Rs.7500/- per month per member and the annual aggregate turnover of RWA by way of supplying of services and goods is also Rs.20 lakhs or more. Annual turnover of RWA Monthly maintenance charge RWAs are entitled to take ITC of GST paid by them on capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes, other sanitary/hardware fillings etc.) and input services such as repair and maintenance services.

Application of Rs.7500/- Limit per Residential Apartment for RWA Membership: As per general business sense, a person who owns two or more residential apartments in a housing society or a residential complex shall normally be a member of the RWA for each residential apartment owned by him separately. The ceiling of Rs.7500/- per month per member shall be applied separately for each residential apartment owned by him.

Example for understanding the above scenario

• If a person owns two residential apartments in a residential complex and pays Rs.15000/- per month as maintenance charges towards maintenance of each apartment to the RWA (Rs.7500/- per month in respect of each residential apartment), the exemption from GST shall be available to each apartment.

• The exemption from GST on maintenance charges charged by a RWA from residents is available only if such charges do not exceed Rs.7500/- per month per member. In case the charges exceed Rs.7500/- per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs.9000/- per month per member, GST @18% shall be payable on the entire amount of Rs.9000/- and not on [Rs.9000 - Rs.7500] = Rs.1500/- .

RESIDENTIAL SOCIETY WHERE THERE ARE COMMERCIAL UNITS:

• The exemption of Rs.7500/- per month per member for maintenance charges applies to residential societies or complexes.

• If a residential society includes both residential flats and commercial shops, the exemption can still be applicable.

• If the commercial unit is a member of the residential society, the exemption can cover maintenance charges for that unit, provided they do not exceed Rs.7500 per month per member.

REGISTRATION REQUIREMENT IS SUMMARIZED TABLE:

INCLUSION AND EXCLUSION OF EXPENSES UNDER THE LIMIT OF RS.7500

Expenses in which Society act merely as Pure Agent, no service portion is involved. Therefore not Liable to tax.  However it is advisable to have separate invoice for the below mentioned expenses.

Illustrative list of expenses and its taxability is as per below table:

INPUT TAX CREDIT:

• Co-operative Societies registered under GST can claim Input Tax Credit (ITC) for CGST, SGST, IGST, UTGST, and IGST on imports, but not for composition levy.

• Proportionate ITC is applicable if goods and services are used for both taxable and exempt supplies to members.

• Other Condition for availing ITC need to check and accordingly can take ITC. No sector specific restriction is there to avail ITC.

COMPLIANCE REQUIRENMENT: Co-operative societies have to comply with regular GST Compliances like others such as GSTR-1, GSTR-3B, GSTR-9 and 9C if applicable.

SELECTED CASE LAWS FOR READY REFERENCE:

APSARA CO-OPERATIVE HOUSING SOCIETY LTD : Activities such as obtaining conveyance from builder, managing, maintaining and administering property of society, raising funds for achieving objects of society can be considered as rendering of supply of services to its members as per section 7 CGST Act.

EMERALD COURT CO-OP HOUSING SOCIETY LTD : With the observations of MAAR that the contribution by the outgoing member is nothing but Advance amounts paid to the society for services carried out or to be carried out for the members of the Society and is therefore taxable as per the GST Laws.

MAHAVIR NAGAR SHIV SHRUSHTI CO-OP. HOUSING SOCIETY LIMITED:  It has been held that the Appellant-society is not eligible to avail ITC of the tax paid on the works contract services received from their appointed contractor in terms of the limitations provided under section 17(5)(c) of the CGST Act, 2017, as they cannot be said to be providing works contract.

Monalisa Co-Operative Housing Society Ltd: With the observations of MAAR that the contribution by the outgoing member is nothing but Advance amounts paid to the society for services carried out or to be carried out for the members of the Society and is therefore taxable as per the GST Laws.

Vishal Co-Operative Housing Society Ltd: Below is the decision taken.

• The society's mixed residential and commercial nature necessitates further discussion on whether it can cease GST payments and surrender its registration.

• Input Tax Credit (ITC) for major and minor repair works related to immovable property may not be available if the society continues its registration, as per Section 17(5)(c) of the CGST Act.

• Despite claiming an exemption of INR 7,500 for residential units, the society can still claim ITC on various services, proportionately, as specified in Section 17(2) of the CGST Act.