By Adv Vinod Sampat
Why Housing Society is covered under GST : GST is applicable to the dealer-person who is rendering the service or supplying the goods in its regular course of business activity. Person has been defined under 2(84) as follow:- “person” includes— (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (e) a Limited Liability Partnership; (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013; (h) anybody corporate incorporated by or under the laws of a country outside India; (i) a co-operative society registered under any law relating to co-operative societies; j) a local authority; (k) Central Government or a State Government; (l) society as defined under the Societies Registration Act, 1860; (m) trust; and (n) every artificial juridical person, not falling within any of the above. From this it can be noted that under clause (i) a co-operative housing society will be covered. Can the activities of housing Societies be considered as “Business Activity”?
The term business has been defined under Section 2(17) as follow:- “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 (a); (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 license 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; The above clause (e) specifically covered a Society, thus the housing society will be considered as carrying out activities in furtherance of business and will be liable for Registration under GST.
REVERSE CHARGES The “reverse charges” has been define u/s 2(98) as “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act. Thus, under the following cases the Recipient must pay the required GST 1) Any transaction notified by the Government, as on date nothing has been notified but likely it may be for a) Transport payment b) Lawyer Professional Fees c) Security Payment d) Payment where people are providing labour, etc. 2) Obtaining goods / services from UNREGISTERED DEALER. The recipient will have to prepare an Invoice in such circumstances and pay the tax to government and prepare Payment Voucher ALL persons liable to pay tax under Reverse Charges will have to be registered themselves under the act irrespective of their liabilities on basis of Turnover.
In all probabilities, most of even small societies may be coming for registration under this provision of section 24(iii) and (iv) Summary of above Act and Few Queries-
1) Whether the Maharashtra Housing Society will be covered under GST ?
Answer is YES
2) Whether any exemption is available on basis of turnover?
YES a) If the Society’s aggregate receipt of turnover is less than ? 20,00,000 it will not be liable for Registration and tax collection. b) If the Society’s aggregate receipt of turnover is more than ? 20,00,000 but less than ? 50,00,000 and does not desired to claim any tax credit on its expenses paid GST it can go for Composition Scheme under Section 10. c) If the Society’s aggregate receipt of turnover is more than ? 50,00,000 it will be fully covered like any other business entity.
3) Will the Billing format of the Society will have to be changed ?
Yes, the format will have to be changed and it will be changed as format to be notified.
4) Will the method of accounting have to be changed?
Yes, now as the tax paid on the expense side is available under specific scenario, the party-wise details have to be uploaded and the work being done with various type of online / offline programs will undergo a major change to provide for recording detailed expenses in lieu of recording transactions as being done presently, whereby few society are paying collecting and paying taxes inefficiently increasing the cascading effects.
5) Will the Input tax Credit be available on all the expenses incurred by the Society ?
On following expenses where the taxes are paid No Input tax Credit will be available, i.e. a) Electricity Expenses b) Stamp Duty c) Property Tax
6) Will the reverse charge mechanism applicable to the Society?
On certain transaction, it’s expected that reverse charge mechanism will be applicable and accordingly the GST will have to be paid first and then the Credit may be claimed. Details provided in Annexure “D”. Under GST, all dealers including a Society will have to file 3 returns in a month for each and every transaction on the billing side on 10th of following month and on expenses side on 15th of following month and consolidated return on 20th of following month and an Annual Return has to be filled. Thus in all 37 returns will have to be filled. Other than these, if they deduct TDS then they will have to also filed GSTR-7 by 10th of the following month. However, certain societies may fall under quarterly return if they have opted for Composition Scheme by forfeiting all the Credit on expenses and willing to pay tax on receipts. Composition Scheme is not dealt with over here as it requires a separate approach.
7) Will a Separate Audit be required under GST?
Yes, if the turnover exceeds prescribed limit. Thus, in effect there may be minimum 3 audit as follow: – a) Statutory Audit b) GST Audit c) Income Tax Audit
8) On what amount GST must be paid?
GST is payable on consideration, which has been defined under section 2(31) of the CGST and state law have been requested to follow and align their laws in line with CGST. Thus, it is assumed at this moment that it will be the same. Consideration includes not only amount receivable for an activity but also monetary consideration for agreeing to refrain from an activity. However, it’s provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply . That means on deposit there will be no GST, unless supply and / or service is made against that deposit. Registration : A Co-op Hsg Society is required to be registered under GST , if the Aggregate turnover exceeds Rs 20 lakhs annually. Aggregate turnover shall include all taxable, and exempt services. Aggregate turnover means all billing other than Municipal Tax & Sinking Fund , but includes Interest received from banks, and members. Registration : If the Society has to pay GST under Reverse Charge [ Supply of services by Advocates ], irrespective of the turnover, the Society has to Register under GST . Exemptions : If the maintenance charges towards reimbursement of charges / contributions is less than Rs 5000/- per month. GST will not be charged to such members. However, such members will be charged GST on Vehicle parking charges, Non –occupancy charges , Facility booking, Share Transfer premium etc. which are not of the kind of contributions or reimbursement of charges. If the maintenance charges towards reimbursement of charges / contributions exceeds Rs 5000/-per month , GST will be charged. [ provided the aggregate turnover is more than Rs 20 Lakhs annually. ] Reverse Charge: If the Society receives any supply of services from Advocates / firm of advocates, the society has to register under GST and pay the GST under Reverse Charge. In case of a Society registered under GST, the GST shall be paid on Inward Supply of goods / services by an Unregistered Vendor under Reverse charge. Taxation on Bills raised on members. Municipal Tax : is covered under Services provided by the Society to its members as an Agent of the Service Recipient and thus, outside the provisions of GST . However, exact amount of Municipal Tax is required to be recovered from members as paid to BMC . Sinking fund : is covered under Deposits without any provision of supply of service and thus, is outside the provisions of GST. However, on utilization of the Sinking Fund, it will become Taxable and Tax has to be paid. Water Charges : Water is procured by the Society from the Municipal Corporation and is supplied to the members. Water is a “goods” and attracts “zero “ rate of tax . All other charges, including electricity , repair fund , maintenance charges , service charges , vehicle parking charges, non – occupancy charges, any other recovery of expenditure, etc are taxable under the category “Services provided by other membership organizations n.e.c.” under SAC number “999599” Interest/ penalty on delayed payment of maintenance charges is taxable under GST. Advance Received from members, if any, towards the maintenance charges, is taxable under GST, adjustable against GST payable on raising of monthly/ quarterly bill. Taxation on other Income [ from members or non members ] Interest earned from banks is “Exempt” from GST . Rent received from any Hoarding / Cell phone tower etc, is taxable under the categories :- 997211 : Rental or Leasing Services involving own or leased residential property. 997212 :Rental or Leasing Services involving own or leased non- residential property . Facility booking charges Fit out charges Reimbursement of Expenditure Share Transfer premium Membership Entrance Fee / Share Transfer fee Exhibition in the Society premises etc. Are taxable. Security Deposits : All refundable security deposits are outside the provisions of GST . Input Tax Credit : All the GST paid on inward supply either for services or for goods , can be set off against liability to pay GST by the Society . However, In case of capital goods procurement, [ Fixed Assets ], the Input Tax Credit can be availed equally spread over five years. (iii) If the society is availing the benefit of Exemption, then proportionate Input Tax Credit as is attributable to exempted services will not be available for Input Tax Credit. Tax payments. GST has to be paid on or before 20th of Each month for the tax liability of the previous month. GST is to be paid after adjustment of Input Tax Credit available. All GST has to paid electronically. A challan can be downloaded from the GSTN(This is the application of the Department to deal with all GST matters -Returns, Refunds, Payments etc. ) and this challan can be paid at any approved Bank. Returns. Any Registered Society is required to file three Monthly returns and one Annual Return. If the Aggregate turnover of the Society exceeds, then the Annual Report has to be submitted along with a Reconciliation statement certified by a Chartered Accountant. All the returns are time bound . Return GSTR – 1. This return has to be filed on or before 10th of Each month. In this return one will report the invoice details of all the registered recipients, and the summary of all the invoices raised to unregistered recipients. Also the return includes all tax liability arising out of Reverse Charge . If there be any corrections in the invoices either through a Debit note / Credit note or omissions/ wrong reporting in the previous returns etc,the same have also to be reported under the relevant sub-returns. There are certain other statistical information to be furnished such as total amount of Zero rated supplies, Exempted Supplies , Supplies outside the purview of GST , Sl no of invoices issues, invoices cancelled and net number of invoices issued. Etc. While making the return, the Society will also state the GST liability. GSTR – 2. This return has to be filed during the period 11th to 15th of each month for all the Input Services of the previous Month. To the extent the Registered Suppliers of Goods or Services have provided the details in their GSTR -1 return, the data will be auto populated, and the society has only to verify the same. Any corrections, omissions etc can be incorporated in this return. Besides this, the Society has to file all the individual invoice data regarding Inward Supply from unregistered Vendors. There are certain other information to be provided such total amount of Zero rated supplies, Exempted Supplies , Supplies outside the purview of GST etc. While filing the details of the invoices, the Society will also file the Input Tax credit available to it. Matching :This is an action to be undertaken by the Society between 16th and 17th .Any corrections or additions made by the Registered Recipient through his GSTR -2 will be available for acceptance or corrections, or rejections by the Society. GSTR – 3. This return has to be filed on or before 20th of each month after payment of GST . This is a return to show the liability of the Society to pay the GST .This is auto populated . The return will allow the Society to adjust the GST payable by it through debit to its GST paid ledger, Input Tax ledger etc.The interest, penalty or any other demand also can be adjusted out of the GST paid account. Annual Return -The annual return has to be filed on or before 31st of December next year. This is basically a Annual Reconciliation Statement. For Aggregate annual turnover less than Rs 1 Crore, the return is self certified. For aggregate turnover exceeding Rs 1 Crore, the return has to be certified by a Chartered Accountant. Corrections reporting in GSTR 1 and GSTR 2 will be allowed for any month of the year, upto September next, or upto the date of filing of the Annual Return whichever is earlier.