GST Insight and applicability of GST on Co-op Hsg Societies-
GST Insight and applicability of GST on Co-op Hsg Societies-
Why Maharashtra 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.
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.
Why Maharashtra 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.
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.
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