Authored by: CA Vinod Kumar Atal

What is Goods and Service Tax?

  • Destination based tax on consumption of Goods & Services
  • levied at all stages right from manufacture up to final consumption
  • Credit of taxes paid at previous stages available as setoff
  • only value addition will be taxed and burden of the tax is to be borne by the final consumer

Which of the existing taxes are proposed to be subsumed under GST?

The GST would replace the following taxes:

(i) taxes currently levied and collected by the Centre:

  • Central Excise duty
  • Duties of Excise (Medicinal and Toilet Preparations)
  • Additional Duties of Excise (Goods of Special Importance)
  • Additional Duties of Excise (Textiles and Textile Products)
  • Additional Duties of Customs (commonly known as CVD)
  • Special Additional Duty of Customs (SAD)
  • Service Tax
  • Central Surcharges and Cesses so far as they relate to supply of goods and services

(ii) State taxes that would be subsumed under the GST are:

  • State VAT
  • Central Sales Tax c. Luxury Tax
  • Entry Tax (all forms)
  • Entertainment and Amusement Tax (except when levied by the local bodies)
  • Taxes on advertisements g. Purchase Tax
  •  Taxes on lotteries, betting, and gambling
  • State Surcharges and Cesses so far as they relate to supply of goods and services 

The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST.

What type of GST is proposed to be implemented?

It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and/or services would be called the Central GST (CGST) and that to be levied by the States/ Union territory would be called the State GST (SGST)/ UTGST. Similarly, Integrated GST (IGST) will be levied and administered by Centre on every interstate supply of goods and services.

Housing Societies and the current indirect tax structure

Currently, the housing societies are covered under the provision of Service Tax Act. All Apartment Owners Associations/ Housing Societies where the taxable Income i.e. total receipts less exempted amounts during last year exceed Rs 12 lacs are required to be registered under Service Tax and pay the same.

The service tax is exempted up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex

Service Tax is applicable to the Commercial Association or Units, no exemption is applicable. The Exemption is applicable for Residential Units or housing societies only.

Impact of GST on Housing Societies

Registration under the GST

every supplier (including his agent) who makes a taxable supply i.e. supply of goods and / or services which are leviable to tax under GST law, and his aggregate turnover in a financial year exceeds the threshold limit of twenty lakh rupees shall be liable to register himself in the State or the Union territory of Delhi or Puducherry from where he makes the taxable supply.

In case of eleven special category states (as mentioned in Art.279A(4)(g) of the Constitution of India), this threshold limit for registration liability is ten lakh rupees.

Aggregate turnover shall include the aggregate value of all taxable supplies, exempt supplies and exports of goods and/or services and exclude taxes viz. GST

As per this provision, every housing society having receipt above the threshold i.e 20 lakh rupees or 10 lakh rupees as specified shall be required to get registered under the GST. Turnover includes the exempted supplies. For example, if a housing society collects the maintenance fees from its member above 20 lakh rupees in a year ( or 10 Lakh rupees as specified) will require to get registered irrespective of the fact the fee is less than five thousand rupees per month per member.

Payment of Goods and Service Tax

Rates Under GST: Service Tax Exemptions to be continued in GST as decided by GST Council for housing societies under the below para.

Service by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution –

(a) as a trade union;

(b) for the provision of carrying out any activity which is exempt from the levy of GST; or

(c) up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex;

This exemption will not be available for commercial units or societies.

The rate for the GST is 18 %.  E.g., if you charge Rs. 6000/month maintenance for a flat, the total amount to be collected from the Member is [Rs.6000 + 18% of Rs.6000] However if the amount charged per flat is less than 5000/month than no GST applicable.

Advantage of Registration under GST

  • GST provided input credit benefit for all the Goods purchased or services availed by the society i.e. Lift AMC, Housekeeping, Security, Fire AMC, Repairs & Maintenance, Contract staff, Accounting & Auditing Services, Software/ ADDA Portal & other services etc.
  • For example, if the GST will be charged @ 18% (or at applicable rates/ Reverse charge ) for the services availed or goods purchased for these goods and services, same will be available for input to the society and can claim as refund if no output liability or fall under exemption with minimal compliance cost. (Subject to input tax credit apportionment for taxable and exempted services). Earlier there was no credit available for good purchased for the society, under GST society can avail the benefit of input. This will reduce the overall cost to the society.

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