50,000 co-op housing societies in Mumbai and suburbs under ambit of GST

Approximately 70,000 co-operative housing societies (CHS) in the state, including 50,000 in the Mumbai Metropolitan Region (MMR), will have to register under the Goods and Services Tax (GST) regime as their annual collections (turnover) are likely to exceed the threshold of Rs 20 lakh. This number was confirmed by senior co-operative officials.

In many instances, transfer fees, which are charged by the CHS and paid by incoming and outgoing members when a flat in the CHS is sold, contribute significantly towards a society's annual collection.

While the model bylaws under the Maharashtra Co-operative Societies Act have placed a limit of Rs 25,000 on transfer fees, in reality the fees run into a lakh or more per transfer.

Thus, collections from transfer fees may mean that even CHSs housing the middle classes may find themselves having a turnover of over the threshold of Rs 20 lakh and would need to register under GST.

"In such instances, any transfer fee paid to the society by the new owner on exchange of ownership of flat will be taxable under GST at 18%."

Once a society is registered under GST, it has to meet various filing obligations. It also has to comply with the provisions of the reverse charge mechanism. Under this mechanism, if it makes payments to unregistered service providers such as cleaners, electricians and plumbers, it will have to bear the GST of 18% on such payments and also have to file relevant forms on the GSTN portal.

But what is important for flat owners is that the criteria for registration and for imposition of GST on maintenance charges collected from members are different. The government has time and again clarified that GST will be levied on maintenance charges collected from flat owners (members of the CHS) only if the annual collection of the society is Rs 20 lakh or more and the monthly maintenance charge is more than Rs 5,000 per member.

Maintenance charges are typically collected by a CHS for various purposes like providing security, lift maintenance, maintenance of common areas like a lobby or a garden and are typically a reimbursement for expenses incurred. Taxes like property, water, or electricity charges collected by the CHS from its members on behalf of local authorities or power entities will not be subject to GST.

According to a government circular, co-operative housing societies under GST are entitled to input tax credit (ITC) in respect of taxes paid by them on capital goods (such as generators, water pumps, lawn furniture), goods (such as taps, pipes, other sanitary/hardware fillings) and against input services such as repair and maintenance services.

Flat owners who have been asked to pay GST by their CHS should check that the society has obtained valid registration.