As the annual collections (turnover) of the 70,000 co-operative housing societies (CHS) in the state, including 50,000 in the Mumbai Metropolitan Region (MMR) are likely to exceed the threshold of Rs 20 lakh, they has to get registered under the Goods and Services Tax (GST).  In many cases, 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.

It was seen when 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%,” said Ramesh Prabhu, chairman of Maharashtra Societies Welfare Association which has a membership of over 50,000 societies.

It is said, once a society is registered under GST, it has to comply with various filing obligations along with 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 the important thing for flat owners is the criteria for registration and for imposition of GST on maintenance charges collected from members are different. The government has already made clear that GST shall be collected on the maintenance charges by the flat owners (members of the CHS) only if the annual collection of the society is Rs20 lakh or more and the monthly maintenance charge is more than Rs5,000 per member.

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. However, despite the increase in ITC, many of the members have found an increase in the bills from 15% to 18%. Vidyesh Karmarkar from Jeevandayini cooperative housing society in Malad said his society had already started charging 3% more taxation than before, thus taking the overall taxation on Rs. 5,300 monthly maintenance to Rs. 954. “Earlier we paid Rs795 on the same amount. Thus the new taxation is a net increase of Rs159 on the bill,” he pointed out.

Sources –The Times Of India

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