Central Goods and Services Tax is an indirect tax to be paid by end-users for the consumption of goods and services. It was implemented in 2017 and it applies not just to individuals and corporations, but to housing societies as well, with exceptions, of course.
To understand in-depth the correct eligibility criteria for a housing society’s liability towards GST, here’s a comprehensive guide that covers all essential information and facts you need to know about co-operative society compliance with GST rules.
What is GST and inclusion provision under the Act
|
Act
|
Inclusions/Definitions
|
|---|---|
|
CGST Act 2017 Section 7
|
“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.
|
|
CGST Act 2017 Section 7 And Section 2 (17 e)
|
States “business” as “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 Act applicability to housing societies
1. As per Section 2(84) “Person” includes
a co-operative society registered under any law relating to co-operative societies or Society as defined under the Societies Registration Act, 1860. A cooperative housing society is to be considered as ‘person’ under the definition of ‘supply’.
2. As per Sec 2(31) “Consideration”
in relation to the supply of goods or services or both includes (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government.
Housing Society/Apartments Registration Under GST
As per Section 22, if the turnover of the housing society is over Rs 20 lakh and/or it levies more than Rs 20 lakh in aggregate annual maintenance charges in a financial year, it needs to take registration under GST laws and obtain a registration number, but the payment of GST depends on other parameters (covered below).
However, there are exceptions for Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand, where the threshold limit for registration liability is Rs 10 lakh.
Criteria for applicable GST payment for society Maintenance
If the society’s monthly maintenance bill is more than Rs 7500 per house, 18% GST is applicable on the entire amount.
If a person owns more than one residence in a society, then a ‘separate’ ceiling of Rs 7500 is considered as the second unit also gets an individual exemption of Rs 7500.
However, there is an exemption if the annual aggregate turnover of the housing society is not over Rs 20 lakh.
Thus, for GST to apply, two criteria must be met.
|
Annual turnover of a housing society
|
Monthly maintenance charge
|
GST
|
|---|---|---|
|
₹20 Lakh or less
|
₹7500 or less
|
Exempt
|
|
₹20 Lakh or less
|
More than ₹7500
|
Exempt
|
|
More than ₹20 Lakh
|
₹7500 or less
|
Exempt
|
|
More than ₹20 Lakh
|
More than ₹7500
|
Applicable
|
Furthermore, GST doesn’t apply to the difference amount alone. For example, if the monthly maintenance bill is Rs 9000, GST will apply to the entire amount, not just to Rs 1500.
Property Tax, Water Tax, Municipal Tax, Non-Agricultural Land Tax paid to the state are exempt from GST.
Sinking Fund, Maintenance and Repair Funds, Car Parking funds, Non-Occupancy Funds, interest from late payments, are not exempt from GST since they are considered charges collected by the society for the supply of services to members.
Let’s understand this in detail for clarity.
Inclusions and exclusions for the societies who fall above limit of Rs 7500
1. Sinking fund
It is considered a type of service provided by the housing society to its residents hence included.
2. Repairs & maintenance fund
This falls in the category of residents paying for repairs, common services, audits, maintenance dues, etc., thus it’s to be considered as inclusion as it falls under taxability.
3. Non-occupancy charges
These are not considered a part of the Property Tax for common premises, hence included.
4. Parking charges
The same logic applies for parking charges since it’s an individual collection for a specific service.
5. Water charges
If the water charges are collected on behalf of the members by the society for individual use (e.g. water tankers or government source), then they don’t fall under taxation under GST limit as tax may already be applied on it as per the law. If the water charges are for common use,l (e.g. generating electricity to give drinking/potable water facilities as a service), then they’re included under the Rs 7500 limit.
6. Property Tax
Property tax on common areas is to be considered as an inclusion in the limit as well. However, if the society is only an intermediary, collecting individual residents’ property tax and handing it over to the government, then it’s not considered under the limit. Property Tax on any other places, like stores and parking spaces (if applicable) should be subject to respective law but not included in GST calculations.
7. Share Transfer Fees
At the time of property sale share transfer fees are charged which are taxable, which is why they are not included in GST.
8. Common services
Services like the clubhouse, gym, pool are considered taxable, hence must be utilised under GST calculations. If a society uses common spaces like clubhouse, garden, terrace or any other part of the premises for use of members and outsiders on rent, for hire, it’s liable for tax, hence must be covered under the calculation slab.
9. Income received as interest on defaulters
It is considered an individual charge and not used for common uses, thus it’s excluded from taxation consideration.
10. Income received from renting space
Income received from renting space for mobile towers is derived from business, thus it’s to be included in the calculation.
Input Tax Credit for society/apartment
ITC is the reduction in tax that you can claim since you’ve already paid on the goods and services. For example, if you’re a housing society who has paid for pipes and construction materials for repair and maintenance of your premises, or have hired the services of an Auditor for your annual accounts, you can claim the credit upon it.
Housing Societies will avail the benefits of ITC which means that if they pay taxes on repair and renovation, capital goods (generators, lawn furniture, water pumps, etc.) and other goods (taps, pipes, hardware, construction materials), they will receive a tax deduction but for them to avail this benefit, the reverse charge mechanism will apply on all goods and services received by suppliers; the set-off can be claimed against the tax liability for maintenance funds.
However, this benefit is available if the amount charged for these supplies is over Rs 7500 per member.
A housing society can impart the benefits of Input Tax Credit by lowering the maintenance charges for members, the amount of which can be determined after proper cost analysis and comparison of output/input tax amounts against overall expenses and income.
Input Tax Credit for society/apartment
ITC is the reduction in tax that you can claim since you’ve already paid on the goods and services. For example, if you’re a housing society who has paid for pipes and construction materials for repair and maintenance of your premises, or have hired the services of an Auditor for your annual accounts, you can claim the credit upon it.
Housing Societies will avail the benefits of ITC which means that if they pay taxes on repair and renovation, capital goods (generators, lawn furniture, water pumps, etc.) and other goods (taps, pipes, hardware, construction materials), they will receive a tax deduction but for them to avail this benefit, the reverse charge mechanism will apply on all goods and services received by suppliers; the set-off can be claimed against the tax liability for maintenance funds.
However, this benefit is available if the amount charged for these supplies is over Rs 7500 per member.
A housing society can impart the benefits of Input Tax Credit by lowering the maintenance charges for members, the amount of which can be determined after proper cost analysis and comparison of output/input tax amounts against overall expenses and income.
What are the requirements for claiming ITC for housing society?
- Society should have the tax invoice
- Goods/services procured should be actually received and if they’re being received in installments, the last installment should be received before claiming ITC.
- Tax Returns should have been filed by the society
- The supplier of goods/services has paid the tax being charged to the government.
- ITC is not allowed if the depreciation has already been claimed on the tax component of capital goods/services.
Periodic Filing and Compliance Rules for housing society
A housing society has to file 37 returns, three returns per month which include:
– Billing Side – 10th of the following month
– Expense Side – 15th of the following month
– Consolidated Return – 20th of the following month
– As well as: One Annual Return GSTR 9 by the end of 31st December next year (for the year 2019-2020 by 31st December 2020)
If a housing society deducts TDS, then they have to file GSTR7 by the 10th of the following month. Housing Societies do not fall under the Composition Scheme.
MC/RWA are expected to maintain proper records of all Supply and Expense reports for 72 months for auditing purposes.
Different GST Forms and their importance
- GST 1 – to be filled by all regular taxpayers who are registered under GST, including casual taxable persons (with debit/credit notes, invoices of outward supply).
- GST 2A(&B) are view/read-only available and relevant for the recipient or buyer of goods and services and can be referred to when any invoice is missing, the buyer can communicate with the seller to upload it in their GSTR-1. No action can be taken on GSTR 2. 2B contains constant ITC data for back referral.
- GST 3B (3 not in use currently)- This is to be also filled by all normal taxpayers including societies to provide details of supplies made, ITC claims details, tax liabilities and payments.
Housing societies should ensure that sales/supplies and ITC details must be reconciled with GSTR 1 and GSTR 2B every tax season before filing GSTR 3B.
Frequently asked questions
It’s Goods and Services Tax which is levied on the supply of goods and services and is a value-added tax levied on most goods and services sold for domestic and commercial consumption.
Yes. GST exemption and application applies to property used for commercial purposes.
Yes. If the vendor’s services fall under GST rules, the society has to pay as per the percentage applied. E.g., GST payable for contractor services.
In this case, GST applies only on the second apartment for which the maintenance is Rs 8000.
The society has to add GST to the monthly, quarterly, yearly invoice and mention the GSTIN No on all invoices where applicable.
Monthly GST forms are GSTR 1, GSTR 2A, GSTR 3.
On services such as lift AMC, Housekeeping, Security, Fire AMC, Contracting Staff, Accounting and Auditing Services, etc.
Property tax, electricity charges collected from individual flat owners and other statutory levies are excluded.
Water/electricity charges for common areas and common services like clubhouse, swimming pool, along with parking charges, common property tax, payments for repair and maintenance, security, admin, accounting, Non Occupancy charges.
No. Share Transfer Fees are taxable but not included in the Rs 7500 limit as no third party is involved. Similarly, interest on default is an individual charge, so it’s taxable, but not covered under the limit of Rs 7500.
Ever since the changes in Budget 2021 were introduced, all types of cooperative housing societies are included under GST applicability as they provide services to the members. However, exemptions apply.
It’s 18% (State GST is 9% and Central GST is 9%).
a) In general, invoices issued by the supplier.
b) An invoice such as a Bill of Supply if the amount is less than Rs 200 or if reverse charges mechanism applies.
c) Bill of Entry or similar documents issued by the Customs Department (if applicable)
d) Bill of Supply issued by the supplier
e) Other documents required in the Form
Maintenance charges up to an amount of Rs. 7500 per month, per member, are exempt from GST. Earlier, the exemption was available on a monthly maintenance charge of up to Rs. 5000 per member. The limit was increased to Rs. 7500 with effect from 25th January 2018.
In such case, GST exemption of Rs. 7500 per month, per apartment, shall be applied separately for each apartment owned by him.
For example, if a person owns two residential apartments in a society and pays Rs. 15000 per month as a maintenance charge (calculated at Rs. 7500 per month, per apartment), the exemption from GST shall be available to each apartment.
In case, for society, the maintenance charges exceed Rs. 7500 per month, per member, the entire amount is taxable.
Let’s understand this with an example. If the monthly maintenance charges for a housing society are Rs. 9000 per member, the GST @18% shall be payable on the entire amount of Rs. 9000 and not on Rs. 1500.
* Refer to the latest GST circular issued by the Government of India, Ministry of Finance Department of Revenue (Tax Research Unit), New Delhi.
| Total amount received | Water charges | Sinking fund | Taxable |
| 8000 | 500 | 500 | 7500 |
| 4000 | 500 | 500 | 0 |
Taxpayers should enter the ITC amount in their monthly, quarterly, yearly GST forms (Form GSTR-1,2,3) and enter details like amounts eligible and ineligible for ITC and reversal, etc. as mentioned in the form. The recipients can claim provisional input tax credit in GSTR-3B to the extent of 5% instead of earlier 10% of the total ITC available in GSTR-2B for the month.
Invoices uploaded by the seller in GSTR-1 can be viewed by the purchaser in his GSTR-2B form.