GST On Co-operative Housing Society

GST On Co-operative Housing Society

Co-operative Housing Societies

Co-operative housing societies are voluntary associations of individuals with common needs who come together to achieve a common economic interest. Co-operatives are entities registered under the cooperative laws of their respective state. The main objective of a co-operative is to provide support for its members. People come together only to pool their resources and derive common benefits but not any profit.

Co-operatives also supply certain services to their members who stay in a residential society by collecting statuary dues for maintenance of the building, security and also to statuary authorities. A cooperative can be formed as per the provisions laid down in the Cooperative Societies Act, 1912. It states that at least 10 individuals of age above 18 with the capacity to enter into a contract with common economic objectives can come together to form a cooperative society.

A cooperative society is a special type of business organisation that,

  • Open membership – The membership for the society is open to anyone with a common interest. The minimum numbers of individuals required are 10 but there is no upper limit on the number of members but it is specified by the members after the formation.
  • Voluntary- Members join the co-operative by their choice as and when he likes, stays for as long as he like and can leave at will.
  • State Control- To protect the interest of the members, cooperative societies are placed under state control through registration. Also, society has to submit details about the members and the business it undertakes while maintaining the book of accounts that are to be audited by government auditors.
  • Democratic Management- The society is managed by a group of members of society known as the “Board of Directors” who are elected representatives of the society.
  • Separate Legal Entity
  • Distribution of Surplus- Co-operatives while providing services to their members also generate profits while conducting business. The profit is not earned at the cost of members and is distributed on the basis of member’s participation in the business of the society.
  • Self-help – Co-operative work and thrive on the principle of mutual help.

GST On Co-operative Housing Societies

GST applies to the supply of services by a person if it is a non-profit or cooperative society. The activities of the housing society would thus attract GST and it needs to register itself and comply with the GST Law.

As the activity of the society is considered furtherance of business. As per clause (e) of section 2(17) of the CGST Act, the business includes “provision by a club, association, society or any such body of the facilities or benefits to its members.

Exemption from GST

Notification No.12/2017 – Central Tax (Rate) dated 28.06.2017 provides an exemption to housing societies. Service by an unincorporated body or non-profit entity registered under the law for the time being in force, to its own members by way of reimbursement of charges or share of contribution-

  1. As a trade union.
  2. For the provision of carrying out any activity that is exempted from the GST.
  3. If the housing society is collecting up to Rs. 7500 per month per member then no GST is not to be levied to source goods or services for the common benefit of the members.

If the monthly bill exceeds Rs. 7500, GST will be levied on the exceeded amount. For example, if the monthly maintenance bill per member is Rs. 10000, the GST will be levied upon the difference i.e., Rs. 2500 only.

GST is levied upon sinking funds, repairs & maintenance fund, car parking charges, non-occupancy charges or simple interest for late payments as these charges are collected by the housing society for the supply of services meant for its members.

Also, if the annual turnover or the maintenance charges is less than 20 lakhs, it need not register under the GST Law and no GST will be levied. Only when the annual turnover exceeds 20 lakh, the cooperative is required to register as per the GST Law and obtain the GST number for the payment of charges as applicable.

Exemption of Services

The charges on the services exempted from the GST do not contribute towards the monthly bill of members. These are-

  • Services provided by theCentral government. State government, a Union territory or local authority to a person other than a business entity is exempted from GST therefore GST on  Property Tax, Water Tax collected by the housing society from the members is not levied. Similarly, GST is also not applicable to Non-agricultural tax, electricity charges, etc. But if these charges are collected for the generation of electricity by the society generator or to provide drinking water, then the charges collected for these services are liable to GST.

As per section 23(1) of the CGST Act 2017, the following persons are not liable to registrations completely

  • Any person engaged in the business of supplying goods or services exempted from the GST under the integrated Goods and Services Tax Act.
  • An agriculturist, to the extent of supply of produce out of cultivation of land.

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