The Goods and Services Tax (GST), introduced in India as a unified tax regime, has significant implications for various sectors, including co-operative housing societies. Governed by the Central Board of Indirect Taxes and Customs (CBIC) under the Directorate General of Taxpayer Services, the application of GST to housing societies is a topic of interest for residents and administrators alike. This article discuss into the intricacies of GST as it pertains to housing societies, addressing its applicability, compliance requirements, exemptions, and overall impact.
What Are Co-operative Housing Societies?
Co-operative housing societies are entities registered under the co-operative laws of their respective states. As defined under Section 2(16) of the Maharashtra Co-operative Society Act, 1960, a “housing society” is a collective body formed with the primary objective of providing its members with open plots, dwelling houses, or flats. Additionally, these societies are tasked with offering common amenities and services, such as maintenance, security, and the collection and remittance of statutory dues. Essentially, they represent a group of individuals residing in a residential complex, working together to manage shared responsibilities.
Is GST Applicable to Housing Societies?
A fundamental question arises: Are the services provided by a housing society to its members subject to GST? The answer is affirmative, and the GST framework provides clarity on this matter.
Under Section 9 of the Central Goods and Services Tax (CGST) Act, 2017, GST is levied on the supply of goods and services. Section 7 of the Act defines “supply” broadly, encompassing all forms of supply—such as sale, transfer, barter, exchange, license, rental, lease, or disposal—made for consideration in the course or furtherance of business. Importantly, Section 2(84)(i) explicitly includes a registered co-operative society within the definition of a “person,” making housing societies liable under GST.
Furthermore, Section 2(17) defines “business” in a way that encompasses the activities of housing societies. Specifically, clause (e) states that the provision of facilities or benefits by a club, association, or society to its members for a subscription or other consideration qualifies as a business activity. This includes services like maintenance, security, and the procurement of goods or services for common use. Consequently, the activities of a housing society attract GST, mandating registration and compliance with the GST Law if certain thresholds are met.
Compliance Requirements Under GST
Housing societies must adhere to specific compliance requirements under GST, depending on their turnover and the nature of services provided. According to Section 22 of the CGST Act, 2017, GST registration is mandatory if the society’s aggregate turnover exceeds Rs. 20 lakhs in a financial year. However, GST registration does not automatically imply that GST must be charged on all transactions.
Notification No. 12/2017-Central Tax (Rate), dated June 28, 2017, provides key exemptions for housing societies. Serial No. 77 of this notification exempts services provided by an unincorporated body or a non-profit entity (registered under applicable laws) to its members, including:
- Reimbursement of charges or contributions as a trade union;
- Activities exempt from GST;
- Contributions up to Rs. 7,500 per month per member for sourcing goods or services from third parties for common use in a housing society or residential complex.
Thus, if a society’s monthly maintenance charge per member is Rs. 7,500 or lessand these funds are used to procure goods or services for common useno GST is applicable, even if the society is registered. However, if the contribution exceeds Rs. 7,500, GST applies to the entire amount, not just the excess. For instance, if the monthly bill is Rs. 9,500, GST is levied on the full Rs. 9,500, not merely the Rs. 2,000 above the threshold.
Treatment of Statutory Dues in Maintenance Bills
Maintenance bills often include statutory dues like property tax, water tax, and electricity charges. A common query is whether these should be factored into the Rs. 7,500 limit. The exemption under clause (b) of Notification No. 12/2017 clarifies that activities exempt from GSTsuch as collecting property tax or electricity charges on behalf of authoritiesare excluded from this calculation, provided the society is a non-profit entity. Thus, only charges related to taxable services (e.g., maintenance funds, parking fees) count toward the Rs. 7,500 threshold.
The Tax Research Unit (TRU) has further elaborated on this in FAQs released under F.No. 332/04/2017-TRU. For example:
- Exempt Charges: Property tax, water tax, non-agricultural tax, and electricity charges collected on behalf of government bodies are not subject to GST.
- Taxable Charges: Sinking funds, repairs and maintenance funds, car parking charges, non-occupancy charges, and interest on late payments are liable to GST, as they constitute services provided by the society to its members.
GST Registration Exemptions
Section 23(1) of the CGST Act, 2017, exempts certain entities from GST registration, including those exclusively engaged in supplying goods or services that are either not liable to tax or wholly exempt. If a society’s turnover is below Rs. 20 lakhsor even exceeds this but involves only exempt services (e.g., monthly contributions below Rs. 7,500) GST registration is not required.
Will GST Make Housing Society Services More Expensive?
Concerns have been raised about whether GST increases the cost of services provided by housing societies, often referred to as Resident Welfare Associations (RWAs). A press release dated July 13, 2017, by the CBIC refutes such claims, emphasizing that GST does not inherently burden RWAs.
Key points include:
- Contributions up to Rs. 7,500 per member per month for common-use services remain exempt.
- If an RWA’s annual turnover is Rs. 20 lakhs or less, all supplies are exempt, even if individual contributions exceed Rs. 7,500.
- For RWAs with turnover above Rs. 20 lakhs and contributions exceeding Rs. 7,500, GST applies. However, the tax burden is mitigated by Input Tax Credit (ITC), which allows societies to offset GST paid on capital goods (e.g., generators, pumps) and services (e.g., repairs). This ITC was unavailable under the pre-GST service tax regime, making GST more cost-effective.
In essence, GST does not significantly alter the tax implications for housing societies compared to the service tax era and, in many cases, reduces the net tax liability.
Final Words
The GST framework for housing societies largely mirrors the pre-existing service tax regime, with added benefits like ITC. Exemptions ensure that smaller societies with monthly contributions below Rs. 7,500 face no tax burden, while larger societies benefit from a more streamlined tax structure. GST remains a favorable regime for housing societies, balancing compliance with cost efficiency.
