India witnessed a major tax reform when the Goods and Services Tax (GST) was introduced on July 1, 2017. GST is a destination-based consumption tax that has replaced the previous indirect tax system that was complicated and had multiple taxes. The GST framework is designed to be simple, transparent, and efficient, and is therefore beneficial for small and medium-sized businesses and startups.
A housing society is a group of individuals who come together to live in a common space or locality. Housing societies are governed by the Housing Societies Act of India, which outlines the rights and duties of members, office bearers, and management committees. Housing societies are required to comply with the GST law and must register under GST if their turnover exceeds the prescribed limit.
Under GST law, housing societies are classified as cooperative societies and are exempted from paying GST on the following services:
Services like security, housekeeping, and maintenance provided to a housing society are exempt from GST. However, if a housing society charges a maintenance fee from its members, then it is liable to pay GST on the amount collected from members. The GST rate for maintenance fee is fixed at 18%.
Housing societies generate interest income by investing their funds in banks and other financial institutions. Interest income earned by a housing society is not subject to GST.
Housing societies are eligible to claim input tax credit on goods and services purchased for the purpose of providing taxable services to its members. Input tax credit can be claimed on goods and services like electricity, water supply, security, housekeeping, and maintenance services.
Housing societies are required to register under GST if their annual turnover exceeds Rs. 20 lakhs. However, if a housing society provides services only to its members and the turnover is less than Rs. 20 lakhs, then it is not required to register under GST.
Housing societies are required to file monthly or quarterly GST returns, depending on their turnover. A monthly return needs to be filed if the annual turnover exceeds Rs. 1.5 crore, while a quarterly return needs to be filed if the annual turnover is less than Rs. 1.5 crore.
Housing societies whose annual turnover exceeds Rs. 2 crore are required to get their accounts audited by a chartered accountant or a cost accountant. The audit report needs to be filed along with the GST return.
With the implementation of GST, housing societies have now come under the ambit of the new tax regime. Housing societies have been granted certain exemptions and provisions under GST law, which need to be adhered to. It is important for housing societies to be aware of the provisions under GST law to comply with the provisions and avoid any legal complications.
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