Clarification on the exemption available to Co-operative Housing Societies under GST
The government has issued a clarification in Circular no. 109 dated 22nd July 2019. It has a contradictory view compared to views expressed in the GST Flyer issued by CBIC and reply received from the Helpdesk of CBIC Mitra.
The clarification was issued after an Advance Ruling issued by Tamil Nadu Authority for Advance Ruling in case of TVH Lumbini Square Owners Association, Purasawalkam. As per the clarification issued now the exemption limit of Rs. 7,500 will be completely lost if the maintenance charges exceed Rs. 7,500. GST will be payable @18% on the entire amount and not on the difference amount.
To understand better, if maintenance charges are Rs, 7500 then GST will be zero. But if maintenance charges are Rs.7,501 then GST will be 18% of Rs. 7,501.
There is a lot of confusion as different experts have different views as to how and on what amount GST will be levied on maintenance charges charged by a co-operative housing society. A few renowned experts are of the view that if the maintenance charges per month exceed Rs. 7,500/- then GST will be levied on the entire amount. Whereas a few other experts have the exactly contradictory view that GST shall be levied on only the amount that is above Rs. 7,500/-. As per our understanding and survey, most of the CHS are availing the exemption of Rs. 7,500/- per month on maintenance charges.
The brief on GST charge to CHS is as follows???????
⊗ HSN Code for services provided by a Co-operative Housing Society is Heading 9995.
⊗ Corresponding GST Rate for services provided by Co-op. Hsg. Society is 9% i.e. Total 18% [CGST 9% + SGST 9%) prescribed by Notification No.11/2017-Central Tax (Rate) in entry no.33 which covers Heading 9995.
After reading the notifications word by word, listening to expert views and based on conversations with government resources, earlier are view was that no GST shall be charged up to an amount of Rs 7,500/-. But after the ruling issued by Tamil Nadu AAR and clarification issued by Govt., GST will be payable on the entire amount if the monthly maintenance charges exceed Rs. 7,500/-
Let’s understand what Notification 12/2017 has to say. Notification begins with the following words
“In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the intra-State supply of services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under sub-section (1) of section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table, namely:-“
Now let’s replace entry no. 77 into the above para and read again for understanding what it has to say
“In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the intra-State supply of 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 from so much of the central tax leviable thereon under sub-section (1) of section 9 of the said Act, as is in excess of the said tax calculated at the NIL rate, unless specified otherwise, subject to the NIL conditions.”
The above limit of Rs. 5,000/- was raised to Rs. 7,500/- w.e.f. 25-01-18 vide CGST(R) Notification dated 25-01-18. notification is attached for your reference.
This makes it clear that GST would be applicable if the monthly contribution from a member exceeds Rs. 7,500/-. GST would be applicable on the entire amount if it exceeds Rs.7,500/- and not on the differential amount.
Mail from CBEC Mitra
To clear our doubts as to what and how GST should be levied on maintenance charges we have also consulted the official CBICmitra Helpdesk on toll-free helpline:1800-1200-232 & firstname.lastname@example.org. The email received from email@example.com is attached for your reference.
The GST Flyer also clearly states that it would be applicable on amount excess of Rs.7,500/- ( it was increased from Rs. 5,000)