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GST on Housing Society

Housing society are non profit oriented organization, which works for its members. Housing, under GST, it is important that said societies should evaluate GST Impact on its activity.

GST is not just on organization who are doing profit motive business, but it is also applicable to on association of person, charitable organization. There is one argument that, GST is applicable only if, I am doing business with intention to Earn the profit. However this is not so.

Recently, Authority of Advance Ruling of Maharashtra, is case of Lions Club of Poona ( AAR No  ara - 33/2018-19/B-100 ) clarified that, “Lions club is required to obtain GST Registration, for activity performed by it, even though there is no furtherance of business and it is just activity done for its members.”

The definition of business as per section 2(17) of the CGST Act, 2017 is as under “business” includes––

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

(b) ..….. (c) …… (d) ……

(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 

Having doubt regarding ITC | Watch Video

There was concern that levy of GST will increase, maintenance charges payable by members drastically. However, vide press release dated 13th July 2019, government has clarified that,

“Residential Welfare Association (RWA) / Housing Societies shall be required to pay GST on monthly subscription/contribution charged from its members if such subscription is more than Rs. 5000 per member ( now increased to Rs 7500/-) and the annual turnover of RWA by way of supplying of services and goods is also Rs. 20 lakhs or more.

Under GST, the tax burden on RWAs will be lower for the reason that they would now be entitled to Input Tax Credit in respect of taxes 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.

ITC of Central Excise and VAT paid on goods and capital goods was not available in the pre-GST period and these were a cost to the RWA. Thus, there is no change made to services provided by the Housing Society (RWA) to its members in the GST era.”

  • However, three were some concern, of applicability of GST on various amount collected by housing society, how limit of Rs 7500 is calculated. In order to clarify the same, government has issued:

    Circular No 109/28/2019 GST dated 22nd July 2019
    FAQ, vide TRU letter, F. No. 332/04/2017

    In this article, we will be understanding various issues, its solution and its clarification from government, with respect GST on Housing Society

REQUIREMENT OF REGISTRATION TO RWA:

  • 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

  • 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

GST IMPLICATION ON MAINTENANCE CHARGES AND EXEMPTION CALCULATION:

  • Supply of service by RWA 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.

  • 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

  • What if a Person owns more than two flats in society - 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. For example, 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

  • What if, monthly charges are more than Rs 7500? - 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/- .

GST IMPLICATION ON OTHER AMOUNTS COLLECTED BY RWA (PROPERTY TAX, ELECTRICITY, WATER TAX, SINKING FUND, INTEREST ETC):

  • Services provided 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 RWA/Co-operative Society on behalf of the MCGM from individual flat owners, then GST is not leviable

  • Similarly, GST is not leviable on Non Agricultural Tax, Electricity Charges etc, which are collected under other statutes from individual flat owners. However, if these charges are collected by the Society for generation of electricity by Society’s generator or to provide drinking water facility or any other service, then such charges collected by the society are liable to GST.

  • Sinking fund, repairs & maintenance fund, car parking charges, Non- occupancy charges or simple interest for late payment, attract GST, as these charges are collected by the RWA/Co-operative Society for supply of services meant for its members.
Claim input tax credit

INPUT TAX CREDIT:

  • RWAs are entitled to take Input Tax Credit 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.

  • However, on exempted turnover, proportionate Input Tax Credit is required to be reversed as per Sec 17 read with Rule 42

CONCLUSION:

RWA, where charges collected from members are more than Rs 7500/- per month, they should ensure GST Compliance. Else in future, they may receive notice of Big Tax Bucket and in that event, past ITC will also not be available. To summarize, GST implication on Housing Society is as under:

Annual Turnover of Housing Society

GST Registration Required?

Monthly Maintenance Charges

Whether Exempt?

Whether ITC Available

More than Rs 20 lakhs

Yes, if some taxable turnover exists

More than Rs 7,500/-

No

Yes

More than Rs 20 lakhs

Yes, if some taxable turnover exists

Rs 7500 or less than Rs 7500

Yes

No

Less than Rs 20 lakhs

No

More than Rs 7,500/-

Yes

No

Less than Rs 20 lakhs

No

Rs 7500 or less than Rs 7500

Yes

No


About the author

He has authored book on GST, titled as “Handbook on GST For Beginners”. Also he has authored Two E Book on - GST E Way Bill and GST Amendment Act. He has conducted seminars on GST, Indirect Tax & Foreign Trade Policy at – FIEO, ICAI, MSME, CII, MCCIA, WMTPA, Institute of Cost Accountant of India, Various association, colleges and Institutions etc He has conducted 250+ seminars on IDT across India, for Professional, Students, Officers, Practitioners etc He is instrumental in obtaining Circular from Department. Also, he is Recognized Faculty for GST by ICAI. He is member of IDT Study group Pune of ICAI. He is member of “Taxation Committee”, of MCCIA. He is Chairman of ‘CGST – L & R – Committee’ of WMTPA He is regularly writing the articles which are published in various leading Taxation Magazine and online portal.

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  1. Most RWAs charge their members basis sft of the apartment. In a housing society, one may have apartments ranging from 1500 sft to 5000 sft.
    Is the amount charged by RWA calculated by dividing total charges / #of members OR it is calculated individually for each member according to the charge payable by them to the RWA ?
    If it is the former, then if average monthly charge pm > 7500, then all pay GST.
    If it is the latter, then only the smaller flats that < 7500 pm pay GST. The others dont

    How is the ITC availed then ? is it availed per the total ares under GST and the rest is an " expense " to be paid by all members ?

  2. Suppose a cooperative society is not liable for Gst. But collect gst on transfer fee of member. Is this applicable and where does that amount reflected in Balance sheet.
    Thx

  3. I have 2 queries:

    1. With respect to a residential CHS where common expenses are apportioned on area or sft basis, certain smaller flats have monthly bills < Rs. 7500undefined- and the larger ones have monthly bills > Rs.7500undefined-. In such circumstances, is it alright not to charge GST where the monthly maintenance is < Rs. 7500undefined- assuming that the Society is availing of ITC?

    2. In cases where there are co-owners of a single flat, is it alright to issue two separate bills to the co-owners for the same flat but apportioning the monthly maintenance basis their respective ownership shares?

  4. GST IMPLICATION ON MAINTENANCE CHARGES collected by RWA:
    A society has 3-4 types of Flats i.e. 2 Bed Room to 4 Bed Room Flats and therefore have different Maintenance Charges for these different Category of Flats. In case any One Category say 4 Bed Room Flat Maintenance Charges are more than Rs. 7500undefined- per month per Flat.

    May please clarify that GST would be attracted only for those flats having more than Rs. 7500undefined- per month per Flat or GST would be universally applied on all the Flats.

  5. 'Conclusion'- of the writer is prima facie tragically faulty and woefully misleading. For, he would have come to a diagonally opposite conclusion had he been aware and taken into due consideration the long settled COMMON LAW PRINCIPLE of 'MUTUALITY' , which has an overriding effect on the legislative enactment – the GST law herein.

    For a detailed discussion of the Judge-made law on the stated Doctrine ( DoM) he will do well to not feel shy but make up his mind through the host of literature and useful material available ii public domain- e.g. on the professional website of TAXGuru. in and the social websites such as- FAcebook and Linkedin !

    courtesy

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