GST on Apartments: A Complete Guide for Co-operative Housing Societies
Co-operative housing societies register as individuals to collectively develop land for residential purposes. These purposes include the construction of apartment buildings or houses and the development of open plots for future construction. Government regulations require housing societies in India to register under the co-operative laws of their respective states and pay GST.
Applicability of GST Act to Housing Societies
As per the provisions of the GST Act, a co-operative housing society should be considered as a ‘person’. The applicability of this tax law does not depend on whether the society is making a profit or loss. All types of housing societies engaged in business activities are liable to pay GST. However, GST on co-operative housing societies is not applicable if the annual turnover from business activities is less than Rs. 20 lakhs.
The business activities of a co operative housing society include:
- receipts from investments
- income from renting of common areas
- share transfer fee from society members
- income from mobile towers on the premises
- receipts from the advertisement board
- Society maintenance charges from its members
Registration of Housing Societies under the GST Act
A co-operative housing society is liable to register under the GST Act once its annual turnover exceeds Rs. 20 lakhs. This requirement is stated under the provisions of Section 22. However, special category states have a limit of Rs. 10 lakhs before they are eligible to register. These states include Mizoram, Tripura, Assam, Uttarakhand, Himachal Pradesh, Nagaland, Manipur, Arunachal Pradesh, Sikkim, Meghalaya, Telangana, Jammu and Kashmir.
The new regime of GST on apartments in a cooperative housing societies requires a society to register even if it has not crossed the annual turnover threshold. However, they do not need to register if they cross the limit and each member needs to make a monthly maintenance contribution of less than Rs. 7500.
Criteria to Apply GST Payment to Housing Society
While the housing society is responsible for collecting the GST on apartments from the respective owners, before levying the GST, the following criteria must be considered:
| Annual Turnover Limit | Monthly Maintenance Payment | Applicability of GST |
| Rs. 20 Lakh or less | More than Rs. 7500 | Exempt |
| Rs. 20 Lakh or less | Less than or equal to Rs. 7500 | Exempt |
| More than Rs. 20 Lakh | More than Rs. 7500 | Applicable |
| More than Rs. 20 Lakh | Less than or equal to Rs. 7500 | Exempt |
Inclusion and Exclusion of Expenses for Co-operative Housing Societies
The GST law imposes specific rules for co-operative housing societies. It states what is included and excluded from its applicability. Therefore, it is important to analyse the taxation of common services supplied to society members to calculate the GST on apartments.
Here are the inclusions and exclusions of expenses for co-operative housing societies under the GST Act:
Inclusions
1. Maintenance Charges above Rs. 7500
GST on co-operative housing societies is imposed on services like maintenance, cleaning, security, and other community services. However, these services require the payment of a monthly maintenance charge. If this charge is above Rs. 7,500 per month, the society is liable to pay GST on the whole amount at 18%.
2. Other Services and Goods
All other incomes derived by the housing society from services or goods are liable to GST. These services include renting common spaces and advertisement spaces and exclude maintenance services. Furthermore, the supply of services to a person and leasing the premises for mobile towers are also subject to GST.
3. Input Tax Credit (ITC)
Co operative housing societies are eligible to claim Input Tax Credit on goods and services. For instance, the society can include repairs, constructions, or purchases on the list for ITC services. These services are defined under the taxable income of the society.
4. Annual Membership Fees
If societies charge annual membership renewal fees and the total annual turnover crosses the amount of Rs. 20 Lakhs, then GST is attracted.
5. Property Tax
The payment of property tax attracts GST on apartments. The government does not consider a property tax payment as subject to GST.
6. Non-occupancy Charges
This charge is not considered to be a part of the property tax for common areas in housing societies. So, it is considered under GST on apartments of housing societies.
Exclusions
1. Maintenance Charges Below Rs. 7,500
If the monthly maintenance charges recovered from members are less than Rs. 7,500 then these charges are not liable under GST on apartments. Smaller societies with lower expenses can use this provision to reduce their tax burdens.
2. Water and Electricity Charges
GST excludes collection made for the provision of necessities such as water, electricity, and property taxes. Furthermore, utility providers and local authorities exempt these services.
3. Contribution to Sinking Fund
The contributions which members pay towards the sinking fund are outside GST. The society makes payments for future repairs or replacement of its property. These services are not considered taxable under GST provisions and are therefore excluded.
4. Share Transfer Fees
The sale of property in a co-operative housing society is not considered a taxable service. Hence, it is not charged under the GST provisions.
Statutory Compliance of Co operative Housing Society Under GST
Co-operative housing societies need to follow certain statutory compliance under the GST scheme. Here are some of the compliance regulations of GST on co-operative housing societies:
1. Returns
A society needs to file GST returns monthly using forms GSTR-1, GSTR-2, and GSTR-3. These returns include details of sales and taxes paid on outward and inward supplies. If you fail to file returns on time, fines and penalties may be imposed.
2. Applicability on Maintenance Charges
The monthly maintenance charges should exceed Rs. 7500 for the applicability of GST on co operative housing societies. However, if it is below this limit then the society is exempt. Hence, it becomes mandatory to continuously monitor the collections of maintenance charges in a society.
3. Invoices
Collecting GST on apartments requires the housing society changing the invoice format of bills payable. The GSTIN number, amount of tax counted, and other details need to be mentioned in the invoice. Otherwise, it will be termed as non-compliance with GST provisions and attract fines and penalties.
4. Books of Accounts
The housing society should prepare and maintain proper books of accounts. It is mandatory for compliance with GST laws and tax audits. Once the threshold limit is exceeded, the housing society’s books of accounts will be audited.
Conclusion
To sum up, it is necessary to follow GST laws for some of the services and transactions by the co -operative housing societies. Several mitigating factors alleviate the tax burden on several essential services and smaller societies. Those provisions make sure there is proper control of societies’ finances and that such societies will not encounter too many taxes. GST on apartments is based on strict statutory compliance with regulations. If there is non-compliance then it will attract penalties and fines from the housing society.
Frequently Asked Questions
1. What is a housing society?
A housing society is an individual or entity that develops affordable housing for families. It also develops plots and provides for building houses.
2. Do all co-operative housing societies need GST registration?
All co-operative housing societies need GST registration even if they are not eligible. This change was applicable under the new GST regime.
3. Which maintenance services have the ITC benefit?
The maintenance services of co-operative housing societies which are eligible for ITC include housekeeping, security, lift maintenance, fire, accounting and auditing, and fire.
4. What is the threshold limit for the registration under GST on co-operative housing societies?
The total annual turnover of the co-operative housing society needs to cross RS. 20 lakhs. However, for special category states this limit is Rs. 10 lakhs. These states include Mizoram, Tripura, Assam, Uttarakhand, Himachal Pradesh, Nagaland, Manipur, Arunachal Pradesh, Sikkim, Meghalaya, Telangana, Jammu and Kashmir.
5. What is the rate of GST unco operative housing societies?
All co operative housing societies need to pay the applicable amount of GST. The housing societies pay GST at a rate of 18%, with a rate of 9% for the central tax and 9% for the state tax.
6. What is the GST rate on apartments?
The standard rate of GST is 1% on affordable housing and 5% on non-affordable housing. This amount, however, is levied on purchasing of real estate property.
7. How to avoid GST on apartments?
You can avoid GST on apartments by purchasing ready-to-move flats in India as these properties are not subject to GST.