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Published on:

January 22, 2025

Alankar Mishra

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Basics of GST

GST on Housing Societies

The introduction of GST on Housing Societies has simplified the taxation of various sectors in India, especially for housing societies and RWAs. However, the rules regarding GST's applicability, exemptions, and ramifications for residents can still be tricky. In this article, we explain the rules regarding GST in the case of housing societies, including the thresholds and exemptions and their ramifications for residents.

What is a Housing Society?

A housing society refers to a registered association of individuals who decide to live in a particular residence or building. A housing society is administered under some predefined laws regarding cooperatives which allows for the effective management of activities of the society, conflict management, and resource allocation.

Key Features:

1. Legal Structure: Registered under existing state cooperative society acts.

2. Purpose: Maintenance and setting of utilities as well as other resources is done collectively.

3. Functions: Common area maintenance, maintenance fee collection, and following local government rules.

4. Membership: Membership is automatic for every owner of the property in the housing society who can use the knowledge to vote on various resolutions.

What is GST on Housing Societies?

While providing services such as maintenance, and repairs, ma must pay the GST whence, and any other utility, housing societies and t welfare associations. A threshold based on the society's annual sales and the monthly payments made by each member controls the GST.

Income Tax for Housing Societies

Housing societies as voluntary and cooperative societies pay tax, but not without conditions and exemptions, as per the Income Tax Act 1961.

Important Factors Changing The Tax Liability:

1. Taxable Income: Income derived from non-mutual sources is taxable. (e.g. rent for property, interest on deposits)

2. Exemptions: Members’ contributions, i.e. mutual income are exempt under the principle of mutuality.

3. Tax Rate: A cooperative society pays tax at progressive slab rates.

When Does GST Apply to Housing Societies?

Housing societies are liable for GST as long as they meet certain conditions. These conditions are specific to the turnover and services offered. Familiarity with such conditions is paramount to ensure compliance and accurate tax computation. Here are the primary instances when GST is applicable for housing societies:

Annual Turnover Limit: Housing societies whose turnover is upwards of ₹20 Lakh per annum will be required to have GST registration.

Monthly Fees: GST will be charged on the entire amount if a member's monthly maintenance fee exceeds ₹7,500.

GST Applicability: Societies offering taxable services will incur a basic GST rate of 18%.

GST-Exempt Services in Housing Societies

Although housing societies are required to pay GST on specific services, there are some areas which members need to take note of. These help lessen the burden for the residents as far as essential goods and statutory charges are concerned. Some important services which housing societies offer and for which there is no GST charged are as follows:

Allotment of water: These services are charged free of GST.

Electricity: GST tax On various charges levied for electricity supplied through utility companies does not apply.

Sinking Fund and Reserve Fund: Payments made for these services are charged free of GST.

Statutory Charges: Taxes and property charges imposed by municipalities and property tax collected by the RWAs are not subject to taxation.

GST Rules for Maintenance Charges

GST rules for the Maintenance charge in a housing society are formed to treat the taxation fairly based on members’ contributions. These rules are mostly based on the quantum of the maintenance charges levied and the aggregate revenue of the society. Here are the important provisions related to GST and maintenance charges:

Contribution Limit: Only if the contribution for maintenance exceeds the amount of ₹7,500 a month per member is GST levy applicable.

Pro-rata Applicability: If an individual society’s turnover is more than ₹20 lakh then contributions are subject to GST even when only part of the members pay more than ₹7,500.

Commercial Use of Residential Units: The GST constructively differentiates between commercial and residential use of units, as in the case of housing societies.

How is GST Calculated for Housing Societies?

Scenario Example:

Monthly Contribution	GST Applicability	Example Calculation
Up to ₹7,500	No GST	Contribution: ₹7,500 → GST: ₹0
Above ₹7,500	GST on the entire amount	Contribution: ₹10,000 → GST: ₹1,800 (₹10,000 × 18%)

Input Tax Credit (ITC) for Housing Societies

With their GST registration, housing societies can be eligible for claiming the Input Tax Credit (ITC) for GST liability incurred against the goods and services availed in the course of carrying out their activities which include:

Maintenance and repairs on common facilities.

Acquisition of Lift and Generator.

Services of contractors/service providers for the maintenance of the society.

Challenges in GST Compliance for Housing Societies

As a result of the constraints posed by the taxation laws and the compliance requirements, housing societies often have challenges ensuring compliance with GST. Proper management and understanding of these rules are essential in the prevention of any mistakes which can attract penalties. Below are some common challenges housing societies encounter with GST compliance:

1. Administrative Burden: Taxable and non-taxable income sequences should be recorded because they are important. However, keeping such records is not easy.

2. Pro-rata Tax Calculation: Calculating the GST chargeable on members exceeding the gross maintenance limit of ₹7,500 can be difficult.

3. Awareness: Lack of knowledge about GST rules might result in mistakes which may incur penalties.

GST Impact on Housing Societies

The introduction of GST has led to major alterations in the way housing societies operate, this change impacted the members and the management part as well. While it encourages compliance and clocked transparency, it adds different costs and duties. So how does it affect housing societies regarding the imposition of GST?

1. Higher Costs: It becomes another expenditure for the citizens, resulting in increased maintenance costs for society.

2. Transparency: Societies must maintain proper financial records to enhance financial integrity.

3. Compliance: Societies are required to obtain GST registration and file periodic returns thereby adding to the administration load.

Conclusion

GST regulations for housing societies must be comprehended and appropriately implemented to maintain a healthy and transparent financial framework. Though GST on housing societies tends to increase expenditure, it guarantees a degree of responsibility for managing the society’s finances. To avoid the penalties and enjoy the benefits for instance Input Tax Credit Societies have to be familiar with GST TDS rules and guidelines.

FAQs

1. What is GST on society maintenance?

GST on society maintenance pertains to the Goods and Services Tax which is relevant to the maintenance fees of the cooperative or residential housing societies. It is generally applicable when the monthly maintenance fee exceeds ₹7,500 per unit.

2. Is GST applicable on housing society maintenance charges?

If a particular society earns more than ₹20 lakhs in a year and the average maintenance costs are more than ₹7500, then the maintenance fees for residential societies will attract GST.

3. What is the impact of GST on real estate transactions?

The introduction of GST has transformed tax payments by removing levies such as the service tax and VAT which eased the burden of real estate transactions. On the other hand, affordable housing has to deal with a higher tax burden as compared to well-constructed buildings.

‍4. Are there tax rates for cooperative societies under GST?

Naturally, cooperative societies get taxed under GST at 18 per cent for rendered services if their turnover goes beyond the set threshold limits.

5. What does the Maharashtra Housing Society Act say about GST?

The Maharashtra Housing Society Act neither name-checks GST nor seeks to govern like other laws. However, this issue has a bearing on how housing societies work in the state of Maharashtra. As per the rules set forth by the central government, housing societies have to pay GST.

6. What are the parking rules under the Co-operative Housing Society Act in Maharashtra?

As per the Maharashtra Co-Operative Housing Society Act, the parking spaces are allocated fairly among the members. Parking spots are allotted according to the society's bylaws, and there is a strict no trading, leasing or renting of parking facilities to outside members clause.

7. Is GST applicable on apartment maintenance?

Maintenance of an apartment is chargeable to GST. But it applies only when the society unit cost exceeds Rs.7500 per month per unit and the society's annual turnover is greater than Rs.20 lakhs.

8. What is GST on the sale of residential property by an individual?

If a seller sells a developed house, they do not have to pay GST since the property is immovable when sold but for properties that are under construction, there is GST which applies at 1% for affordable housing and 5% for all others.

9. What is the Cooperative Housing Society Act in India?

The Cooperative Housing Society Act is an instance of a law created to govern the creation, administration, operation, and bylaws of the housing societies, ensuring proper management and protection of the members’ interests.