GST on Housing Society Contributions: Everything You Need to Know

GST on Maintenance Charges

On 22 July 2019, the Government issued Circular No.109/28/2019- GST on ‘Issues related to GST on monthly subscription/contribution charged by a Residential Welfare Association (RWA) from its members’. The RWA provides multiple services and goods for the common use of its members in a housing society or a residential complex and collects GST on maintenance charges for the same. Flat maintenance charges are the fees collected by RWAs or GST on housing society maintenance from residents.

The GST Act applies not only to Individuals and Corporations but to Housing Societies as well, although there are some exceptions to it. To thoroughly understand the precise eligibility criteria determining the liability of GST on Housing Societies and GST Applicability to Co-Operative Housing Society, explore this comprehensive guide regarding GST Applicability on Housing Societies.  It covers all the crucial information that you need to know about the Impact of GST on Housing Societies and will be a significant help in  Understanding GST for housing societies.

Definitions Attracting Taxability to the Co-operative Societies

Applicability of GST on Housing Societies -

Section 2(84) “Person” includes

A cooperative society is registered under any law relating to cooperative societies or Societies as defined under the Societies Registration Act, 1860.

Sec 7 of CGST Act

“Supply” includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.”

Sec 2(17) “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;

GST on Co-operative housing societies is being attracted based on the definitions provided above, and the concept of supply, a co-operative Housing society, being considered a person, offers services to its members in exchange for consideration, which applies GST on Housing Society.

When Do Housing Societies Pay GST on Maintenance Charges?

As per GST on housing society latest advance ruling, GST on society maintenance charges for maintenance paid by residents to the Resident Welfare Association* are exempt if the amount charged does not exceed INR 7,500 per month, per member (prior to  25 January 2018 the limit was INR 5,000). However, if these charges exceed INR 7,500, GST on maintenance charges of commercial buildings is chargeable on the entire amount charged. The GST on society maintenance is 18% for flat owners paying more than Rs 7,500. *Resident Welfare Association *RWA): RWA is an unincorporated body or a non-profit entity registered under any law in force.

Thus for payment of GST on Housing Society Maintenance charges  two criteria must be met;

Note: If the aggregate turnover of an RWA does not exceed INR 20 lakhs in a financial year, the RWA will not be required to take GST registration nor pay GST even if the amount of GST on maintenance charges of the commercial building exceeds INR 7,500 per month per member. It is the standard GST rate for Maintenance Charges and even GST on apartment maintenance common area charges.

Type of Expenses to Be Included or Excluded Under the Limit of Rs. 7500

Expenses to Be Included 

• Property Tax on Common Area- This is to be included for computing the Limit of Rs. Seven Thousand five hundred.

• Sinking Fund- This is a type of Service Provided to members and hence it is taxable and to be included in the limit of Rs. Seven thousand five hundred.

• Maintenance Charges- This includes expenses related to security, admin, accounts audit, etc. Hence it is taxable and shall be included in the limit of Rs. Seven thousand five hundred.

• Water Charges Common- If the charges are for water commonly used then included in Rs. Seven thousand five hundred Limit and Taxable too.

• Common Services like Club House, Swimming Pool- These charges are chargeable to Tax and covered in Limit of Rs. Seven thousand five hundred

• Use of Common Space for Member or Outsider- Since these are charges liable to taxes,  GST on Housing Society must be collected and thus needs to be included in the limit of Rs. Seven thousand five hundred

Expenses to Be Excluded

• Property Tax- Society is merely an agent to collect it and deposit the same to Govt. Authorities, so it shall not be included.

• Property Tax on Private Space/Parking Area Etc- Society is acting as agent and thus is not taxable and not to be included in the limit of Rs. Seven thousand five hundred.

• Non-Occupancy Charges- These are typical charges for let-out Property that are not for Common Purposes and are to be Taxed to GST and shall not be included.

• Parking Charges- These are generally charged to members for using Parking space. It is purely one to one basis and not for common use, it is chargeable to Tax and not counted in the limit of  Rs. Seven thousand five hundred.

• Share Transfer Fees- It is usually charged for share transfer, especially in case of sale of Property. It is taxable and not counted in Rs. Seven thousand five hundred Limit as No Third Party is Involved

• Water Charges Individual- If water charges are collected by the Housing Society on behalf of an individual member then it is not included in the limit of Rs. Seven thousand five hundred and also not chargeable to tax.

• Interest on Default – This is an individual charge and hence taxable and also not covered under the limit of Rs. Seven thousand five hundred.

• Income on Renting Mobile Tower etc.- Since these are not common services and are mostly to be given to Businesses etc these are chargeable to Tax and in case Society is not under GST then subject to RCM also (after 1st April 2018)

Rate of GST Applicable to Housing Societies

As per the GST rules for housing society, The  GST on Housing Society is applicable at the rate of 18% if the aggregate turnover exceeds 20 lakhs in the Financial Year.

Can Housing Societies Claim Input Tax Credit on Goods and Services?

Resident Welfare Associations (RWAs) are entitled to take ITC of GST paid on capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes, other sanitary/hardware fillings, etc.), and input services (repair and maintenance services) under GST on society maintenance firmed for residential building. Each residential building society issues a notification to flat owners regarding the GST on society maintenance.

Reverse Charge Mechanism (RCM) Applicability

The Reverse Charge Mechanism shall be applicable to a Housing Society GST and tax shall be payable by it on Reverse Charge when it receives services from Goods Transport Agency (GTA), Advocates, and an Unregistered person. However, the Housing Society can claim ITC on taxes paid by them.

Can a Housing Society Be Exempt from Paying GST?

GST on Housing Society is exempt if the turnover of the housing society is up to ₹20 lakh and/or it levies not more than ₹20 lakhs in aggregate annual maintenance charges in a financial year, and thus it is also exempt from taking registration under GST laws.

However, there are exceptions for Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand, where the threshold limit for registration liability is ₹10 lakh.

GST exemption for cooperative society is applicable in the following 3 cases.

1. Annual Turnover is up to ₹20 lacks and the Maintenance Charge per member per month is Up to ₹7500

2. Annual Turnover is up to ₹20 lacks and the Maintenance Charge per member per month is more than ₹7500

3. Annual Turnover is More than ₹20 Lakh and the Maintenance Charge per member per month is up to ₹7500.

Statutory Compliances Under GST Applicable to Housing Societies?

Returns-

When  GST on Housing Society becomes applicable it is required to file 3 returns every month i.e. GSTR-1, GSTR-2, GSTR-3, and One Annual Return GSTR 9 by the end of 31st December next year.

However, if a Housing Society deducts TDS, then they have to file GSTR 7 also by the 10th of the following month.

Invoices-

After getting GST registration a Housing Society is required to change the invoice format of monthly/quarterly/yearly bills invoiced to the members and are required to mention the GSTIN No, the tax collected, and other information required by the Act in the invoice issued by it.

Books of Accounts- 

A Housing Society is required to maintain accurate books of accounts and may need to undergo an audit if its aggregate turnover surpasses the audit threshold limit. Additionally, it must keep proper records of supply and expenses, preserving such records for a period of 72 months.

Conclusion

If a cooperative society's aggregate turnover exceeds 20 lakhs, registration under GST on Co-operative Housing Society becomes mandatory without any other exemption. The Impact of GST on Housing Societies is that they can claim the Input Tax Credit (ITC) on inward supplies, which was previously disallowed. This can result in cost reduction for the society. The society may choose to pass on this benefit to its members by reducing maintenance charges after conducting a detailed cost-benefit analysis available as per GST rules for housing society.

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