The Maharashtra Bench of the Authority for Advance Rulings (AAR) recently held that goods and services tax (GST) is chargeable against the maintenance charges collected by a cooperative 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 in the Finance Act, 2021, whereby a 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 pc on the maintenance charges, if these exceed Rs 7,500 per month per member. However, it should be noted that smaller societies with an annual turnover of Rs 20 lakh or less do not have to register and consequently do not have to comply with GST obligations.
In this case, Andheri-based Emerald CHS failed in its argument that there can be no supply of services (like providing facilities such as security, cleaning, repairs, or ancillary services like accounting and auditing) 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’. The members were only reimbursing the costs and, therefore, no GST could be levied. This contention was shot down by the AAR.
The CHS also stated that post the amendment made in 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.