GST – Goods and Service Tax, The word itself defines what it is. All different types of indirect taxes have been merged and new tax form has being introduced pan India which is GST. GST is applicable on almost all types of goods and services with certain specific exemptions.
With this article I am trying to portrait the impact of GST on housing societies.
GST on Housing Society;
GST is applicable to every person who is dealing in supply of taxable and/or exempt goods or services or both. The definition of person includes society/club association etc. By virtue of definition housing society is also a person for the purpose of GST. Society is dealing in providing the supply of taxable and exempt goods and services to its members with consideration in the form of maintenance charges. Let us go thru some of the definitions of CGST Act 2017 to understand the implication of it on housing societies.
Definition of Person as per CGST Act 2017
Section 2(84) “persons” includes
- A Hindu undivided Family
- A co-operative society registered under any law relating to co-operative societies
- Society as defined under the Societies Registration Act 1860.
As per section 22(1) of CGST Act 2017, Every supplier shall be liable to register under this act in the state or union territory, other than special category states, from where he makes a taxable supply of goods or services or both, if aggregate turnover in a financial year exceeds twenty lakh rupees.
As per section 2(105), supplier includes any person acting as pure agent as well.
As per Section 2(6), “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by the person on reverse charge basis), exempt supplies, export of goods or services or both and inter-state supplies of persons having same Permanent Account Number, to be computed on all India basis but excluding central tax, State tax, Union territory tax, integrated tax and cess.”
Threshold limit to register under GST is turnover exceeding Rs. 20L. The definition of turnover includes all types of supply of goods and/or services. This includes exempt supplies as well.
The applicable GST rate for housing society is 18%, the SAC code is 00440245 (Maintenance and Repair Services).
GST is applicable to housing society as well, as the service tax was applicable earlier. The limit of nontaxable or exempt value of maintenance is upto Rs. 5000/- per member per month. The exemption of Rs. 5000/- shall be on basis of following exemption entry:
“Service provided by unincorporated body or non-profit entity registered under any law for the time being in force, to its members by way of reimbursement of charges or share of contribution –
- up to an amount of five thousand rupees per month per member for sourcing of goods or services or both from a third person for the common use of its members in a housing society or residential complex.”
Any other charges collected by housing societies from its members, which does not qualify for the definition of common use will form a part of taxable goods and/or services supplied to members & would attract GST.
What are the other chargeable services for which society collects charges from its members which does not form a part of expenses for common use:
- Late payment fees
- Parking charges
- Rebates received from outsider for specific class conducted in society
- Non occupancy fees
- Guest room booking
- Club house booking
- Any other receipts
- Transfer Fee
- Admission Fee
- NOC Charges
GST on Reverse Charge Mechanism (RCM): As like Service Tax, In GST also the registered person is require to comply with provisions of RCM. The society needs to comply with RCM requirement as well if it is registered under GST. Now what is RCM? lets understand this first, in RCM the receiver of services or goods are liable to discharge the GST liability on any purchase of goods or services above Rs. 5000 from unregistered persons per day. Which means if society procures any goods or services above Rs. 5000 per day from unregistered persons in totality then society has to pay the GST under RCM with applicable GST rate, the credit of such RCM paid would be allowed to the society in the next month by raising self-invoice. There are some restrictions on availing such credit.
As like other business, Societies can also take input credit of GST on its input services and goods with some restrictions like inputs credits to the extent of supply of taxable services and/or goods are allowed. For eg: Society charge Rs. 4500 per month to its members and also collects some charges towards taxable services viz. Non occupancy fees, transfer fees etc. So input services used for providing the exempted services are not allowed under GST. So the credit can be allowed in proportionate to services used for providing taxable services. The general rule for calculations can be used as follows:
Allowed input credit = total input amount / total receipts or turnover * value of taxable services
Now let us take a hypothetical example to understand the GST implication in better manner:
ABC CHS, having 400 members, collect maintenance charges from its members to maintain the regular expenses of the society. There are also some other receipts to society which are of taxable services. With the help of below test cases lets understanding GST implication
I – Where total receipts of society are of maintenance charges only and does not exceeds Rs. 20L, hence there is no requirement to get registered.
II – Where total receipts of society includes bank interest received on FDR which is excluded in the definition of goods or services in GST. The receipts does not exceeds Rs. 20L, hence no registration required.
III – Where total receipts of society including taxable value of supply or goods and services does not exceed Rs.20L, hence no registration required.
IV– Where total receipts of society includes exempted and taxable value of goods and services exceeds Rs.20L, hence liable for GST registration but liability to pay GST is restricted only to the extent of value of taxable goods or/and services i.e. Rs. 55,000.
V– Where total receipts of society in including exempted and taxable value of goods and services exceeds Rs.20L, hence registration required and liability to pay GST would be on Rs. 10L.
VI– Where total receipts of society including exempted and taxable value of goods and services does not exceed Rs.20L, hence not required to get registered.
VII – Where total receipts of society including exempted and taxable value of goods and services exceeds Rs. 20L, hence registration required and liability to GST would be on Rs. 20,00,400.
VIII – Where total receipts of society including exempted and taxable value of goods and services does not exceeds Rs. 20L, hence no registration required.
IX – Where total receipts of society including exempted and taxable value of goods and services exceeds Rs.20L, hence registration required and liability for GST would on Rs. 20,25,000.
Now take a situation where society is acting as pure agent i.e. collecting charges and paying it to local authority for discharging the dues of members. In such cases where society is acting as pure agent then such charges can be excluded from total receipts for calculating the exempt value of services as defined by the valuation rules for the purpose of calculating maintenance charges and exemption criteria. Lets take an example where Society collects corporation taxes of Rs. 15L from its members towards the taxes levied by municipal authorities for land and building exclusively used by the members for their personal use. Then such Rs. 15L can be taken out from value of total services as per valuation rules.
Analysis of maintenance bill and GST tax liability
Sample format for Maintenance Bill
Offenses under CGST Act 2017
There are almost 20+ types of offenses under CGST Act 2017. I have covered some those as below;
- Failure to apply for registration, modification in the registration details, cancellation of registration etc. under CGST Act 2017 as required Chapter VI (section 22 to 30)
- Non-issue of invoices, issuing false invoices, issues invoices in violation of CGST Act, collects unauthorized tax, – Chapter VII (section 31 to 34)
- Failure to maintain books of accounts and other records as required by CGST Act – Chapter VIII (35 and 36)
- Failure to comply with Returns requirements – Chapter IX (section 37 to 48).
- Tax Evasion by way of obtaining refund incorrectly, availing credit without actual receipt of invoices, failure deposit GST, TDS & TCS – Chapter X & XI (section 49 to 58)
- Providing incorrect information during proceedings, providing wrong information during registration and submitting wrong documents/information/records with intention to evade tax.
Penalties under CGST Act 2017.
- For Tax evasion, short deduction: max of penalty amount to the extend 100% of tax so evade or Rs. 10,000.
- Non-payment or short payment of tax – max of penalty of 10% of tax amount or Rs. 10,000.
- Fails to issue of invoices, committing fraud or helps to commit fraud, fails to maintain books or records, fails to attend summons issued by authority etc. – penalty which may be upto jail term of 5 years and fine of Rs. 25,000 or both depending of severity of fraud.
- Every person who is required to file return of his outward or inward supply as required by section 37 or 38 & 45 by the due date shall require to pay penalty of Rs. 100/- per day for which defaults continue refer section 47(1).
- General penalty – any offense for which the penalty is not specifically defined in the CGST act, the penalty would be Rs. 25,000
Procedure to be followed in general under CGST
- Every person, to whom the penalty is imposed, will be served with show cause notice and will be given reasonable opportunity of being heard.
- A proper explanation, nature of offense and reason will be given by tax authority before imposing any penalty.
- Any person who willingly accepts the breaches of act, in such cases tax authorities may reduce the amount of penalties.
Readers are requested to consult your society auditors and take a necessary steps. This article is informative purpose there might be some cases where the implication may vary from case to case basis.
Keep reading and Keep coming.