Service: GST

Co-operative Housing Societies, governed by the cooperative laws of the individual states, represent a group of residents who provide various services to members, including collecting statutory dues, maintaining buildings, and ensuring security.

FAQ 2. Are Activities of the Housing Society considered Business Activities?

As per section 7(1)(aa) of the CGST Act, 2017 (“the Act”), supply includes the activities or transactions by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment, or other valuable consideration.

Further, as per section 2(17)(e) of the Act, the provision of amenities or perks to its members by clubs, associations, societies, or similar entities for a fee is classified as a business activity.

A Co-operative Housing Society, akin to a members’ club, functions as a collective of its residents. Consequently, the services rendered by a Housing Society to its members are construed as transactions between parties. This places the activities of a housing society under the umbrella of GST, compelling them to register and comply with the intricacies of GST laws.

As per Entry 77 of the GST Exemption Notification, the maintenance charge paid by residents to the Resident Welfare Association (RWA) in a housing society is exempt from GST up to an amount of Rs. 7,500 per month per member.

It implies that even if the turnover of the housing society is above Rs. 20 lakhs (or Rs. 10 lakhs for special category states), it may not have to be registered under GST in terms of Section 22 of the CGST Act, 2017 if its maintenance charges are less than Rs. 7,500 per month per member as it is supplying wholly exempt services not liable to register by the virtue of Section 23 of the said Act.

The provisions can be summarised as:

Note 1: GST is applicable on maintenance charges for commercial property @ 18% irrespective of monthly charges if its turnover crosses the specified limits of Rs. 20 lakhs (or Rs. 10 lakhs for special category states).

Note 2: Prior to 25-01-2018, the exemption limit was Rs. 5,000 per month per member.

RWAs are entitled to take ITC of GST paid by them on the following:

• Capital goods such as water pumps, generators, lawn furniture, etc.
• Goods such as pipes, taps, other sanitary/hardware fillings, etc.
• Input services such as repairs and maintenance services

ITC of Central Excise and VAT paid on goods and capital goods were not available in the pre-GST period and these were a cost to the RWA.

FAQ 5. Exceeding the Limit: What’s Taxable in Maintenance Charges?

If the maintenance charges surpass the Rs. 7,500 threshold per month per member, the GST authorities come knocking on the entire sum’s door. Picture this: if the upkeep bill rings in at Rs. 9,000 monthly per member, the 18% GST applies to the full amount of Rs. 9,000, not just the excess beyond Rs. 7,500 (which would be Rs. 1,500).

Services provided by the Central Government, State Government, Union territory, or local authority to a person other than a business entity, are exempted from GST.

It implies that for Property Tax and Water Tax, if collected by the RWA from individual flat owners, then GST is not leviable on these amounts. Similarly, GST is not leviable on non-agricultural tax, electricity charges, etc., which are collected under other statutes from individual flat owners.

Taking an example, suppose Shyam Sagini Housing Society in Surat collects the following amounts from its members in March 2024

 The question arises if Rs. 7,500 monthly limit per member apply to each apartment or to each person.

It should be noted that Rs. 7,500 monthly limit per member applies individually to each apartment owner, not to each occupant of the apartments. This guideline is upheld because each apartment is viewed as an independent entity with its own membership in the Resident Welfare Association (RWA). Hence, in case a person owns more than one flat in same society, the exemption limit of Rs. 7,500 would be applicable to each flat owned by him.