Services by Co-Operative Housing Societies: Goods and Services Tax Leviable or Not?

Co-operative Housing Societies are entities registered under the co-operative laws of the respective States.

Definition of “Housing Society”

According to Section 2(16) of the Maharashtra Co-operative Society Act, 1960, “housing society” means a society, the object of which is to provide its members with open plots for housing, dwelling houses or flats; or if open plots, the dwelling houses or flats are already acquired, to provide its members common amenities and services. Simply put these are a collective body of persons, who stay in a residential society.

As a collective body, 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.

Is supply of services by co-operative housing societies to their members exempt for Goods and Services Tax (Goods and Services Tax)?

A Society is akin to a club, which is composed of its members. So, can a service provided by a Housing Society to its members be treated as service provided by one person to another. The answer is yes. The following extracts of the Goods and Services Tax law will make the position clear.

Supply by Societies

As per Section 9 of Central Goods and Services Tax Act, 2017, levy of Goods and Services Tax is on supply of goods and services.  As per Section 7 expression “supply” includes —

All forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person

in the course or furtherance of business;

Is Co-Operative Housing Society a “Person” under GST Law?

The definition of “person” in Section 2(84)(i) of the Central Goods and Services Tax Act, 2017 specifically includes a co-operative society registered under any law relating to co-operative societies. Thus a registered co-operative society is a person within the meaning of the term in the Central Goods and Services Tax Act.

Classification of Housing Society Activities as Business

The next question which arises is whether the activity of the society can be said to be in the course or furtherance of business. The definition of business as per section 2(17) of the Central Goods and Services Tax 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) any activity or transaction in connection with or incidental or ancillary to sub-clause

(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;

(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;

(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;

(f) admission, for a consideration, of persons to any premises;

(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;

(h) services provided by a race club by way of totalisator or a licence to book maker in such club ; and

(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.

Thus, as per section 2(17)(e) of the Central Goods and Services Tax Act, 2017 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 is deemed to be a business.

Registration Requirement for housing societies?

The activities of the housing society would thus attract the levy of GST and the housing society would be required to register and comply with the Goods and Services Tax (GST) Law.

PS: It is worthwhile to examine whether the GST Impact on Services by Housing Societies makes the activities more expensive or not, considering the aggregate turnover based exemption limits under the Section 22 of the Goods and Services Tax Act!

Turnover Limits and Exemptions for GST Registration

If the turnover of a housing society is above 20 lakhs, it needs to take registration under GST in terms of Section 22 of the CGST Act, 2017. However, taking registration does not mean that the housing society has to compulsorily charge GST in the monthly maintenance bills raised on its members.

Exemptions: —

Service by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution –

(a) as a trade union;

(b) for the provision of carrying out any activity which is exempt from the levy of Goods and service Tax; or

(c) up to an amount of Seven thousand five hundred rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex.

In view of the provision contained at (c) above, a society may be registered under GST, however if the monthly contribution received from members is less than Rs. 7,500/ - (and the amount is for the purpose of sourcing of goods and services from a third person for the common use of its members), no GST is to be charged by the housing society on the monthly bill raised by the society. However, GST would be applicable if the monthly contribution exceeds Rs. 7,500/ -.

Impact of Statutory Dues

Certain statutory dues such as property tax, electricity charges etc form part of the monthly maintenance bill raised by the society on its members. The question would arise whether such charges should be included while computing the monthly limit of Rs. 7,500/- in terms of clause (c) of sr.no.77 of notification 12/2017 -Central Tax (Rate) dated 28.06.2017.

As per clause (b) of the above exemption, exemption is available to housing societies for provision of carrying out any activity which is exempt from the levy of Goods and service Tax assuming that a housing society is a non-profit registered entity;

and property tax and electricity is exempt from the levy of GST.

Thus, charges collected by the society on account of property tax, electricity charges and other statutory levies would be excluded while calculating the limit of Rs. 7,500/-.

Further, the question would then arise that if the monthly bill is say Rs. 9,000/- (and the same is on account of services for common use of its members), will GST be applicable on Rs. 9,000/- or Rs. 1,500/- which is in excess of Rs. 7500/-. In such cases, exemption is available up to an amount of Rs. 7,500/- and GST would be applicable on the entire amount of Rs, 9000/- and not on [ Rs. 9000 – Rs. 7500] = Rs. 1500/-.

Conclusion

In view of the above, it was clarified by the Central Board of Indirect Taxes and Customs (CBIC) that services provided by a Housing Society [Resident Welfare Association (RWA)] will not become expensive due to GST implications.

It may be mentioned that supply of service by RWA (unincorporated body or a registered non- profit entity) to its own members by way of reimbursement of charges or share of contribution up to an amount of Seven thousand five hundred rupees 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.

Further, if the aggregate turnover of such RWA is up to Rs.20 Lakh in a financial year, then such supplies would be exempted from GST even if charges per member are more than Rs. Seven thousand five hundred, a Goods and Services Tax flyer issued by the Central Board of Indirect Taxes noted.

The Goods and Services Tax (GST) aims to maintain a similar tax structure for housing societies compared to the Service Tax. However, GST offers a lighter tax burden for societies. This is because societies can now claim Input Tax Credit (ITC), which wasn't allowed under Service Tax. Additionally, exemptions under GST ensure no tax burden for smaller societies where monthly contributions per member are below Rs. 7,500. In short, GST is a more favourable tax system for housing societies compared to Service Tax.

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