GST for co-operatives decoded by Chartered accountants in Udaipur

GST for co-operatives and housing society decoded – Applicability, exemptions, registration, and compliance simplified. Chartered accountants in Udaipur provide a practical guide for cooperative societies

Co-operative Societies Act of 1912

” A co-operative society is a society that has been registered under the Co-operative Societies Act of 1912 or any other applicable law in a specific state at the time of registration”.

Characteristics of co-operatives Society

1. Any person can become member irrespective of their cast, creed, and religion.
2. A co-operative society should be registered in order to be considered as legal entity.
3. The liability of the members is limited to the extent of their capital contribution.
4. The members elect the managing committee for working and managing the affairs of the society.
5. The motive of society is to help the weaker section of the community. 
6. The society is governed by the act of the state where it is registered.

Types of cooperative society

There are various types of cooperative society like – Agriculture co-operative society, Producer co-operative society, Purchasing co-operative society, Labour contract co-operative society, Housing co-operative society,  worker co-operative society,  consumer welfare  co-operative society etc., Marketing co-operative society,

Governing provision under the GST Act

 Section 9 of the CGST Act, Goods and Services Tax (GST) is imposed on the supply of goods and services, subject to the provisions and regulations specified.

Every person, who is liable to be registered or already registered under the GST Act, is responsible for paying the tax.

The term “person,” as defined in Section 2(17) of the CGST Act, includes various entities

 (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 (18 of 2013); (h) any body 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 (21 of 1860); (m) trust; and (n) every artificial juridical person, not falling within any of the above;

Thus an Association of Persons (AOP) or Body of Individuals (BOI), Cooperative Society registered under any Cooperative Society Law or a Society defined under the Societies Registration Act, 1860 are included, regardless of whether it is involved in manufacturing, trading of goods, or providing services, falls under the purview of GST law.

As per the 7 of the CGST Act the term “supply “includes:-

(a)  all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

  (b)  Import of services for a consideration whether or not in the course or furtherance of business;1[and];

(c)  The activities specified in Schedule I, made or agreed to be made without a consideration

As per section 2 (17) of the CGST Act, 2017 the term “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;

General Provision to Co-operative Societies

GST is applicable to all types of cooperative societies, similar to other forms of taxable persons as defined in Section 2(84) of the CGST Act, doing the business activities as defined under section  2 (17) of CGST Act  and also involved in the services as per section 7 of the CGST Act. Therefore, the general provisions of the GST Act apply to all types of cooperative societies, including housing cooperative societies. Hence all types of societies should comply with the provisions of registration requirements, tax liability, input tax credit, filing of returns, etc  

Exemption to Housing Societies

Certain exemption are provided to housing societies covered vide Notification 12/17- CT dated 28.06.2017.

Sr. No.	Chapter, Section, Heading, Group or Service Code (Tariff)	Description of Services	Rate (per cent.)	Conditions
77	Heading 9995	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 Goods and service Tax; 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.	Nil	Nil

As per this notification, Exemption was provided where such contribution did not exceed Rs. 5,000 per month per member.

* However, vide Notification No.2/18 dated 25.01.2018, the said limit of Rs. 5,000 was raised to Rs. 7,500 and further clarification was issued  vide Circular No. 109/28/2019- GST dated 22.07.2019.

No, GST is to be liveable if a housing society collects up to Rs. 7,500 per member per month for sourcing goods and services from a third person for the common use of its members,

 However, if specific services provided to its members, then it does not qualify for procuring goods or services for common purpose and it is GST is leviable   example society charges per day charges  from a member for using its garden.,

Regarding clause (b), any amount that is exempted from GST should not be considered. Therefore, property tax, electricity charges, etc., which are already exempt from GST, are not included in the Rs. 7,500 limit.

Residential Welfare Association (RWA) is entitled to take ITC of GST paid by them on the following:

• Capital goods such as furniture, generators, water pumps, etc.
• Goods such as sanitary pipes and fittings, taps, hardware fillings, etc.
• Input services  on  repairs and maintenance services

FAQ

1. What is a Housing Society?

Co-operative Housing Societies are those co-oprative societies which are governed by the cooperative laws of the respective state which consist group of the members providing various types of services such as collecting statutory dues, maintaining buildings, and ensuring security.

2. Which activities are considered as business activities of housing societies?

As per section 2(17)(e) of the Act  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; for a fees is business activity.

Accordingly Co-operative Housing Society is group of members like a club. Consequently, the services rendered such types of societies to its members are regarded as transactions between parties and liable to GST.

3. How much amount is exempted for per member in    Residential Welfare Association (RWA)

As explained above under the head of exemption to housing societies, as per notification number 12/17- CT dated 28.06.2017   under the description of services under clause ( C) . the maintenance charge paid by members to the Resident Welfare Association (RWA) in a housing society is exempt from GST up to an amount of Rs. 7,500 per month per member.

If the turnover of the housing society is above Rs. 20 lakhs but the maintenance charges are less than Rs. 7,500 * per month per member then it is not required to get registered  under GST in terms of Section 22 of the CGST Act, 2017.

* Prior to 25-01-2018, the exemption limit was Rs. 5,000 per month per member.

4. How much amount is taxable if maintenance charges are exceeded the threshold limit?

If the maintenance charges are more than Rs. 7500/- per month per member, then the 18% GST is applicable on whole amount, not only on excess amount.

5. How to calculate the exemption limit if one person owns more than one flat in same society?

In in case a person owns more than one flat in same society, the exemption limit of Rs. 7,500 would be calculated for each flat owned by him.

GST compliance for cooperatives – an expert guide by chartered accountants in udaipur. Understand legal framework, exemptions, registration, invoicing, tax collection and more