The Goods and Services Tax (GST) is a comprehensive indirect tax that has replaced many indirect taxes in India. Its implementation has affected various sectors, including housing societies. Housing societies, particularly cooperative housing societies, are subject to GST regulations, which influence their financial operations and compliance requirements.
A housing society, as defined under the Maharashtra Co-operative Society Act, 1960, is an entity aimed at providing housing or amenities to its members. These societies operate as a collective body, supplying various services such as maintenance, security, and statutory dues collection. Under GST law, the services provided by these societies to their members are considered taxable supplies.
GST is levied on the supply of goods and services as per Section 9 of the Central Goods and Services Tax (CGST) Act, 2017. A cooperative housing society is recognized as a “person” under Section 2(84)(i) of the CGST Act. The activities of housing societies fall under the definition of “business” as per Section 2(17) of the CGST Act, which includes any trade, commerce, or provision of facilities by a society to its members for a subscription or other consideration.
Therefore, housing societies are required to comply with GST regulations if they meet certain criteria. Specifically, if the annual turnover of a housing society exceeds ₹20 lakhs, it must register for GST.
Housing societies with an annual turnover exceeding ₹20 lakhs must register for GST. However, registration does not necessarily mean that GST must be charged on all transactions. According to Notification No.12/2017 – Central Tax (Rate), services provided by a housing society to its members are exempt from GST up to ₹7,500 per month per member. This exemption applies to contributions collected for sourcing goods and services for the common use of members.
If the monthly contribution exceeds ₹7,500, GST is applicable on the entire amount, not just the excess. Additionally, certain charges like property tax, electricity, and water tax, collected on behalf of government bodies, are exempt from GST. However, charges such as sinking fund, repairs and maintenance fund, car parking charges, and non-occupancy charges are subject to GST.
The GST framework provides specific exemptions to ensure that smaller housing societies are not burdened. For example, if the monthly contribution per member does not exceed ₹7,500 and the society’s annual turnover is below ₹20 lakhs, GST registration is not mandatory. Furthermore, charges collected by the society for statutory dues such as property tax and electricity charges, which are exempt from GST, do not count towards the ₹7,500 limit.
Contrary to some reports, the introduction of GST is not expected to make services provided by housing societies more expensive. The primary reason is the availability of Input Tax Credit (ITC) under GST, which was not available under the previous Service Tax regime. Housing societies can now claim ITC on goods and services procured, reducing their overall tax burden.
For example, societies can claim ITC on capital goods like generators and water pumps, and on services like repair and maintenance. This provision helps to mitigate the tax impact and can result in cost savings for the societies.
The GST regime aims to streamline the tax structure and provide clarity on the taxability of services provided by housing societies. By defining clear compliance requirements and offering exemptions for smaller societies, GST ensures that housing societies can manage their operations without an undue tax burden. The ability to claim ITC further supports societies in maintaining financial efficiency. Overall, GST is designed to create a favorable tax environment for housing societies compared to the previous tax regime.
Credits: Government Of India