GST is applicable not just to Individuals and Corporations but also to housing societies. Society is collective body of persons who stay in a residential society. As a collective body of persons, they would be supplying certain services to its members, be it collecting statutory dues from its members and remitting to statutory authorities, maintenance of the building, security etc..

In this article, we will understand specific issues concerning applicability of GST to the Housing societies also known as Residential Welfare Association (RWA).

Provisions Under The GST ACT Which Make Co-operative Housing Societies Liable For GST

Section 2(84) – Definition of “Person” includes:

The definition of Person specifically includes a co-operative society registered under any law relating to co-operative societies or Society as defined under the Societies Registration Act, 1860

Sec 2(17) Definition of “Business” includes:

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; A co-operative society (being a person as defined above) provides services to its member in the form of facilities or benefits to it member (in course of business) for a consideration. Hence based on above definition and concept of supply co-operative society also gets covered under GST.

The Nature of Transactions in Housing Societies

Every member of a housing society has to pay maintenance charges to the presiding society board. More often than not, the money goes into a separate bank account / fund maintained just for the purpose of society maintenance / enhancements. If there are any facilities in disrepair  or some additional items to be purchased, the society will dip into this fund for these new costs.

Registration applicability:

 There is an exemption provided to Housing society vide sr no 77 of Notification no 12/2017- Central Tax (Rate), which provides that maintenance charges paid by the residents to RWA are exempt up to Rs. 7,500/- per month per member.

RWA is not required to take registration and charge GST since its aggregate turnover does not exceed Rs.20 lakh in the financial year even if the amount of maintenance charges exceeds Rs.7,500 per month per member.

Further, the registration and charging of GST would not be required where the aggregate turnover exceeded Rs.20 lakh in a financial year, but the monthly maintenance charges were up to Rs.7,500 per member.

The above can be summarized in the following table:

GST Chargeability for Monthly Member Contribution Charges

GST applicability on various charges collected by RWA is explained below-

Property Tax, Water tax and other statutory levies etc..

If society is collecting these taxes or levies on behalf on individual members and paying to the concerned Government authority, then the society is merely acting as an agent. Thus, these charges will be excluded and consequently GST will not be leviable.

However, if these charges are paid for common area then GST be applicable.

Sinking Fund

This is a “Plan B” sort of a fund which is usually saved aside to pay off any debts that maybe incurred. It can be considered a kind of service provided to the society members and so it is deemed taxable. It too is counted for the limit of Rs7,500.

Non-Occupancy Charges

These are typical charges for flats rented out. These are not for a common purposes for ALL members and to has be taxed to GST as per usual and does not get counted in the exemption fees.

Maintenance Charges

Society members have to pay some amount for additional services like security (installing cameras, hiring watchmen etc.), administration, repairs etc. It is in service for the residents and hence it is taxable, subject to the limit of Rs7,500.

Parking Charges

Generally, GST is charged only to members who use the parking space. It varies person to person and not for common use. So, it is chargeable to GST.

Common Services

Services like Club House, Swimming Pool, Sports Grounds are chargeable to Tax as they are common purpose and are covered under the limit of Rs7,500.

Input Tax Credit (ITC)

If the housing society passes all the ‘tests’ for GST liability, it can claim Input Tax Credit under Sec 16 (1) of CGST Act. ITC can be taken for taxes paid on-

1. Capital goods (generators, water pumps, lawn furniture etc.),

2. Inputs (taps, pipes, other sanitary/hardware fillings etc.) and

3. Input services (repairs and maintenance services, security services, insurance etc..).

Applicability of Reverse Charge Mechanism

Tax liability under Reverse Charge as defined under Sec 2(98) of CGST Act is also applicable. That means tax shall be payable by the Housing Society when supplies are received which are notified Services as per Sec 9(3) of CGST Act. The society can claim ITC on tax paid under RCM.

GST Compliance

Society is required undergo following compliance-

GSTR 1: Details of Sales –

Periodicity: Monthly or Quarterly basis (depending on turnover);

Due date: 11^th or 13^th day of the following month

GSTR 3B: Consolidated Return:

Periodicity: Monthly basis

Due date: 20^th or 22^nd of the following month

GSTR 9: Annual return

Periodicity: Annual

Due date: 31^st December following the financial year.

Conclusion

In so far as tax implications on housing societies are concerned, the position prevailing under Service Tax is sought to be continued under GST. The tax burden under GST will be lower as the 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 societies where the monthly contribution of the individual members does not exceed Rs. 7,500/-. In a nutshell GST will be a favorable tax regime for housing societies vis a vis service tax.