GST on Housing Societies & Resident Welfare Associations.
- 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 five thousand 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.
- 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. five thousand.
- If payment received is greater than Rs 5,000 per member and the yearly turnover of society /RWA by means of supplying of services and goods is also greater than Rs 20 lakhs Housing Society or resident welfare association (RWA) will be required to pay GST on monthly subscription.
Applicability of GST on Resident Welfare Associations.
- All the housing societies and resident welfare association which have an aggregate annual turnover of Rs. 20 lakhs p.a. will have to deal with GST regulations and have to obtain the GST registration. Services provided by all the Housing Society or Resident Welfare Associations will be considered a supply and thus taxable under GST.
- Co-operative Housing Society or Residential Welfare Association shall be treated as a Person as per Sec 2(84) of CGST Act.
- Person making supply of goods or services /both shall be treated as a Supplier as per Sec 2(105) of CGST Act.
- Since the Co-operative Housing Society or Residential Welfare Association providing services to its members, it falls under the definition of Facilities, Benefits and other services provided by society are treated as supply as per As per (1) of CGST Act.
- Monthly / periodic maintenance charges collected from members may be treated as Consideration as per definition provided in Sec 2(31) of CGST Act
- When the aggregate turnover of a Supplier in a financial year exceeds twenty lakh rupees, such Person(s) become Liable for Registration under GST as per Sec 22. (1) Of CGST Act. That means the collection money) maintenance charges by society exceeds Rs 20 Lakhs per Annum then the Society need to be Registered.
- A person who is registered or liable to be registered becomes a “Taxable Person” as per Sec 2(107) of CGST.
- Thus Co-operative Housing Society or Residential Welfare Association whose Turnover crosses Rs 20 Lakhs per Annum become liable for Registration under GST and should charge GST (CGST + SGST) from its members.
Taxable and Non-Chargeable Parts of Housing Society Income
- It is clear that a co-operative housing society providing some common services to its members and collects the expenditure incurred either for some specific purpose like municipal taxes, water charges, electricity charges etc. on the basis of area of flats or some other appropriate basis. Other expense like maintenance, repairs to society’s building, maintaining common facilities like lift, DG Set, Gym, Garden, parking space etc. are also allocated and collected from the members. It is clear that the society is providing above services constitutes as supply. Not all charges or supply by a housing society would be taxable under GST. For instance, housing societies collect and remit property tax on behalf of the residents. GST would not be applicable on the property tax collected and remitted.
- All maintenance and repair charges will be taxable, parking charges and charges for swimming pool, clubhouse and other facilities would be taxable. Sinking fund or repair fund or painting fund would be considered non-taxable.
Input Tax Credit Allowed
- If Housing Society became liable to pay GST, it will allow to take Input Tax Credit under Sec 169 (1) of CGST Act. Housing Society is allowed to claim the ITC In respect to taxes paid by them on Capital Goods such as generator, water pumps, lawn, furniture and machinery etc. Input Services such as repair and maintenance services such as Housekeeping, Security Fire AMC, Repairs & Maintenance, Contract staff, Accounting & Auditing Services and other such services.
- Housing societies are capable to set off their tax liability by claiming Input Tax credit on various expenditure incurred on behalf of the resident for upkeep of property but no ITC would be allowed for the expenditure incurred by the housing society or resident welfare associations.
- Electricity Expenses
- Stamp Duty
- Property Tax
Relaxation under GST:
- Services provided by an unincorporated body or a non-profit organization registered under any law for the time, to its member by the way of reimbursement of charges or contribution towards shares
(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 five thousand 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.
- Services and supply provided by Housing Society and RWA to its own members by way of reimbursement of charges or share of contribution up to Rs 5,000 per month per member for providing services and goods for the personal use of its members in a housing society and residential complex are exempt from GST. But the exemption would not be available for commercial units or complexes.
- If the aggregate turnover of such Housing Society and 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 5,000. And supplies would also be Exempted even if the charges per member are more than Rs. 5000.
Applicability of Reverse Charge Mechanism:
- The tax liability under Reverse charge as defined under the sec 2(98) of CGST Act also be applicable. It means tax liability shall be payable by the housing society when the supplies are received which are notified Services as per Sec 9(3) of CGST Act like services of Goods Transport Agency, Advocate Services etc and also supplies from Un-registered Person under Sec 9(4) of CGST Act. It is suggested to avoid receiving of supplies from unregistered persons.
Whether Eligible for Composition Scheme?
Composition scheme is beneficial for the small Businesses which have Turnover less than Rs 1 crore per Annum. The scheme has many restrictions and one of them is Service Sector. But the Housing Society is not eligible for Composition Scheme.
Invoice Format for Housing Societies:
From the Implementation of GST, All the Housing Society has to make changes in the Invoice Format. The nature of supply made by a housing society and resident welfare association would be in intra-state the CGST and SGST would be applicable.
- In GST all the dealers including society which has annual turnover crosses Rs. 20 lakhs has to be registered.
- GST Registered Housing Society Needs to Issue a Tax Invoice to its Member. All the members have to file 3 Returns in a month.
GSTR – 1 by 11th of following month – Towards Outward Supply (Maintenance Charges)
GSTR – 2 by 15th of following month – Towards Expenses Side and
GSTR – 3 by 20th of following month – Monthly consolidated return and
GSTR – 9 by 31st December of the Following Year.
- Overall have to file 37 returns..
Benefits of GST Compliance for Housing Societies:
- It is advisable for housing societies to get GSTIN and be registered under GST. GST registration will allow the society to reduce the cost by claiming Input tax credit. GST charged by the suppliers for services like housekeeping, repairs, maintenance security, contract staff, accounting as well as auditing services and others can be claimed as a refund if there is no output liability.
- The services provided by co-operative Housing Society and RWA are covered under taxable supply and GST is applicable on it.
- In case where the monthly subscription of members is less than Rs. 7500 per member is exempt from Tax. Apart from it exemptions on supplies up to Rs. 20 lakh per annum is also available to Housing Society.
- If the monthly subscription received from members and also annual turnover Rs. 20 lakh then the Housing society needs to register and discharge tax liability. The society should issue tax from invoice and collect GST @ 18% (CGST @9% + SGST @9%) from the members
- Input Tax Credit is available on tax paid inputs and capital goods to Registered Housing Societies. Since the nature of supply is service, Composition Scheme is not available