The authority for advance rulings (AAR), Maharashtra bench, has held that goods and services tax (GST) is chargeable against the maintenance charges collected by a co-operative housing society (CHS) from its members, if it is in excess of Rs. 7,500 per month.
The AAR took into consideration a retrospective amendment dating back to July 1, 2017, made by the Finance Act, 2021, whereby a co-operative housing society (CHS) and its members are treated as ‘distinct entities’.
This is the first ruling, post the amendment. Thus, the CHS has to collect and pay GST on the amounts received against maintenance charges from its members, as it is a ‘consideration’ received for supply of goods and services, held the AAR.
According to a government circular, a CHS has to levy and collect GST at 18% on the maintenance charges, if these exceed Rs 7,500 per month per member. However, it should be noted that smaller CHS’ with an annual turnover of Rs 20 lakh or less do not have to register and consequently do not have to comply GST obligations.
In this case, Andheri-based Emerald CHS, failed in its argument that there can be no supply of services by a CHS to its members, as it and its members are not distinct entities. In other words, before the AAR, it contended the ‘principle of mutuality would apply’.
To elaborate, the CHS, treated itself as an agent of its members and took the stand that no consideration was paid for the services rendered by it to its members, in the form of providing facilities such as security, cleaning, repairs, provision of water, electricity in common areas or ancillary services like accounting and auditing. The members were only reimbursing the costs and therefore no GST could be levied. This contention was shot down by the AAR.
“In view of the amended Section 7 of the Central GST Act, 2017, we find that the applicant society and its members are distinct persons and the amounts received by the applicant, against maintenance charges, from its members are nothing but consideration received for supply of goods or services as a separate entity,” it stated.
The CHS also tried to argue that post the amendment made by the Finance Act, no notification had been issued. However, the AAR pointed out that the amendment had received the assent of the President on March 28, 2021, and the contentious issue of principles of mutuality in the case of cooperative societies had been settled.
There is another aspect in this ruling. Emerald CHS was raising monthly bills on its members in two parts. One part was for property tax on which GST was not charged and the other part was for maintenance charges on which it collected GST.
The AAR held that the applicant is liable to GST on maintenance charges ‘by whatever name called’ collected from its members, if the monthly contribution from members is more than Rs 7,500 per month.
