Goods and Services Tax (GST) is a tax levied on the supply of goods and services in India. It is a comprehensive, multi-stage, destination-based tax that replaced various indirect taxes. Cooperative Housing Societies (CHS) is an essential part of India's urban landscape, providing affordable housing to millions of people. In this blog, we will discuss the GST applicability on Cooperative Housing Societies in detail. We will also look into the GST compliance obligations for CHS under the GST regime.
Introduction
A Cooperative Housing Society (CHS) is a group of individuals who come together to form a cooperative society to acquire and develop land for residential purposes. CHS provides affordable housing to its members, and the members collectively own and manage the society. GST was introduced in India on 1st July 2017, and since then, there has been confusion about its applicability and GST on Co-operative Housing Society.
GST Applicability on Cooperative Housing Societies
The GST Act does not provide any specific exemption to CHS. Therefore, CHS is liable to pay GST on the services provided by them. CHS provides various services such as maintenance of common areas, security, and housekeeping, which are taxable under GST. However, CHS can claim an input tax credit (ITC) for the GST paid on goods and services used for providing these services.
The GST rate applicable to CHS is 18% on the services provided by them. However, if the annual turnover of CHS is less than Rs. 20 lakhs, they are exempted from GST registration. In addition, CHS can opt for a composition scheme if its annual turnover is less than Rs. 1.5 crores. Under the composition scheme, CHS has to pay a lower rate of GST at 1% on its annual turnover.
GST on Co-Operative Housing Society Compliance Obligations
CHS has various compliance obligations under the GST regime. Some of them are as follows:
- GST Registration: GST on Co-operative Housing Society has registered if their annual turnover is more than Rs. 20 lakhs. GST registration is mandatory for CHS even if they are not liable to pay GST.
- GST Returns: CHS has to file GST returns on a monthly or quarterly basis, depending on their turnover. They have to file GSTR-1, GSTR-3B, and GSTR-4 returns.
- Invoice and Records: CHS has to maintain proper records of invoices and other documents related to GST. They have to issue tax invoices to their members for the services provided by them.
- Input Tax Credit (ITC): CHS can claim ITC for the GST paid on goods and services used for providing taxable services. However, they have to maintain proper records of invoices and other documents related to ITC.
Understand the GST on Co-operative Housing Society applicability
Cooperative Housing Societies (CHS) provide affordable housing to millions of people in India. However, CHS also provides various services such as maintenance of common areas, security, and housekeeping, which are taxable under the Goods and Services Tax (GST) regime.
Under the GST Act, there is no specific exemption provided for CHS. Therefore, CHS is liable to pay GST on the services provided by them. The GST rate applicable to CHS is 18% on the services provided by them. However, if the annual turnover of CHS is less than ₹20 lakhs, they are exempted from GST registration. In addition, CHS can opt for the composition scheme if its annual turnover is less than ₹1.5 crores. Under the composition scheme, CHS has to pay a lower rate of GST at 1% on their annual turnover.
CHS has various compliance obligations under the GST regime. They have to register for GST if their annual turnover is more than ₹20 lakhs. New GST registration is mandatory for CHS even if they are not liable to pay GST. CHS has to file GST returns on a monthly or quarterly basis, depending on their turnover. They have to file GSTR-1, GSTR-3B, and GSTR-4 returns. CHS has to maintain proper records of invoices and other documents related to GST. They have to issue tax invoices to their members for the services provided by them. CHS can claim Input Tax Credit (ITC) for the GST paid on goods and services used for providing taxable services. However, they have to maintain proper records of invoices and other documents related to ITC.
Hence, CHS is liable to pay GST on the services provided by them, and they can claim ITC for the GST paid on goods and services used for providing these services. CHS has various compliance obligations under the GST regime, and they have to register for GST if their annual turnover is more than ₹20 lakhs. CHS can also opt for the composition scheme if its annual turnover is less than ₹1.5 crores to pay a lower rate of GST. CHS needs to understand the GST applicability and compliance obligations to avoid any penalty or interest. Therefore, CHS should seek professional advice and ensure compliance with the GST laws.
Taxability, Exemptions and Rates
Tax Slab for Housing Societies
If a housing society earns up to ₹10,000, the tax is 10% of the total income. For earnings between ₹10,001 and ₹20,000, it’s 20% of the amount exceeding ₹10,000 + ₹1000. Above ₹30,000, it’s 30% of the amount exceeding ₹20,000 + ₹3000. A surcharge of 12% applies if income exceeds ₹1 crore, along with a 3% increase for Education Cess and Higher Education Cess.
Salaries and TDS for Housing Societies
Deduct tax if salaries exceed ₹2,50,000, obtain TAN for TDS, and file quarterly TDS returns. TDS deducted at 1% (individual) or 2% (company) for one-time payments exceeding ₹30,000 or total annual payments exceeding ₹75,000.
GST for Housing Societies
Register for GST if income exceeds ₹20 lakh, excluding monthly member contributions below ₹7500. Property taxes and electricity bills are GST-exempt.
Tax Benefits for Cooperative Housing Societies
Enjoy tax benefits under Section 80P. As of Budget 2022, AMT for cooperative societies was reduced to 15%, and the surcharge for income between ₹1-10 Crores was reduced from 12% to 7%.
Cooperative Society Tax Rate in 2023
- Up to ₹10,000: 10%
- ₹10,000 to ₹20,000: 20%
- Above ₹20,000: 30%
GST on Repairs and Sinking Fund Collection
The Coram (panel of judges) determined that the funds collected by the applicant for the Sinking Fund fall under SAC 9995, categorised as ‘Services of Membership Association.’ These funds are considered advances for future services to members. As per the ruling, such services are subject to Goods and Services Tax (GST) at the rate of 18%. This decision clarifies the taxability of amounts collected for the Sinking Fund under GST regulations, providing guidance on the applicable rate and categorization under the SAC 9995 code.
Inclusions and exclusions for the societies that fall above the limit of Rs 7500
Sinking Fund: It’s recognized as a service provided by the housing society to residents, hence falls within the inclusion.
Repairs & Maintenance Fund: Categorized as residents paying for repairs, common services, audits, maintenance dues, etc., it’s included due to taxability.
Non-Occupancy Charges: Excluded from Property Tax for common premises, hence included.
Parking Charges: Considered individually collected for a specific service, following the same logic, it’s included.
Water Charges: If collected for individual use, not taxable under the GST limit. For common use, it’s included under the ₹7500 limit.
Property Tax: Property tax on common areas is included in the limit. If the society acts only as an intermediary for residents’ property tax, it’s not under the limit. Property tax on other places isn’t included in GST calculations.
Share Transfer Fees: Taxable fees at property sale, not included in GST calculations.
Common Services: Services like the clubhouse, gym, pool are taxable and must be considered in GST calculations. Renting common spaces is liable for tax and falls under the calculation slab.
Income from Interest on Defaulters: Considered an individual charge, excluded from tax considerations.
Income from Renting Space: Income from renting space for mobile towers is business-derived and included in the calculation
Periodic Filing and Compliance Rules for the Housing Society
Periodic Filing and Compliance Guidelines for Housing Societies:
Annual Return Filing: Housing societies must file an annual return with relevant details, including financial statements and member information.
Audit Requirements: Regular financial audits are mandatory for housing societies to ensure transparency and financial health.
GST Compliance: Societies must comply with Goods and Services Tax regulations, filing returns as applicable for services provided.
Property Tax Payments: Timely payment of property taxes on common areas and individual properties is crucial for compliance.
Legal Documentation: Ensure all legal documents, including bylaws and resolutions, are updated and compliant with existing regulations.
Registrar of Societies Compliance: Adhere to the rules set by the Registrar of Societies, including timely submission of required documents.
Membership Records: Maintain accurate and updated records of society members, including changes in ownership or tenancy.
Board Meetings and Resolutions: Conduct regular board meetings and document resolutions to demonstrate proper governance.
Insurance Coverage: Comply with insurance requirements for the society’s assets and liabilities, ensuring adequate coverage.
Environmental and Safety Norms: Adhere to environmental regulations and safety norms for the society premises.
Renewal of Licenses: Ensure timely renewal of licenses and permissions required for specific amenities or services provided by the society.
Communication with Members: Maintain open communication channels with members, keeping them informed about decisions, financial matters, and upcoming events.
What are the Requirements for Claiming ITC for Housing Society?
The society must possess a valid tax invoice. Goods or services should be physically received, and if received in instalments, the last instalment must be received before claiming Input Tax Credit (ITC). The society should have filed tax returns, and the supplier must have paid the tax to the government. ITC is not permissible if depreciation has already been claimed on the tax component of capital goods or services.
Registration Requirement
Section 22 of the CGST Act, 2017 mandates that housing societies if their turnover exceeds ₹20 lakhs or ₹10 lakhs must register under GST. Turnover is calculated without accounting for the amount that is excluded under the aforementioned provisions.
The CGST Act, 2017 states in Section 23.(1) that the following people are exempt from registration requirements:
(a) Any individual who carries on the exclusive business of providing items, services, or both that are completely free from tax under this Act and the Integrated items and Services Tax Act, or that are not subject to tax at all
Therefore, the society does not need to register if its revenue exceeds ₹20 lakhs, but each member’s monthly maintenance contribution is less than ₹7,500 (such services being exempt), and the society does not offer any other taxable services to either its members or outsiders.
FAQs
1. Is GST applicable on society transfer fees?
The GST applicability on society transfer fees depends on various factors, and it's advisable to consult with a tax professional for specific cases.
2. What is the tax audit limit for co-operative housing society?
If the turnover of a society engaged in business activities crosses the threshold of ₹1 crore, it is required to undergo a tax audit. This regulation is effective from the assessment year.
3. Is audit compulsory for cooperative housing society?
Whether an audit is compulsory for a cooperative housing society depends on factors such as turnover, financial transactions, and legal requirements. It's recommended to check the relevant laws or consult with a financial expert for specific details.
4. Is audit mandatory for housing society?
The requirement for a mandatory audit in a housing society depends on various factors, including turnover and legal provisions. Specific details can be obtained by referring to the applicable laws or seeking advice from a financial professional.
Conclusion
In conclusion, GST on Co-operative Housing Society in India. CHS has to pay GST on the services provided by them, and they can claim ITC for the GST paid on goods and services used for providing these services. CHS has various compliance obligations under the GST regime, and they have to register for GST if their annual turnover is more than Rs. 20 lakhs. CHS can also opt for the composition scheme if its annual turnover is less than Rs. 1.5 crores. Therefore, CHS needs to understand the GST applicability and compliance obligations to avoid any penalty or interest.
