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SERVICE TAX PAYABLE BY CO-OPERATIVE HOUSING SOCIETIES

Service tax on Co-Operative Housing Societies is a litigious and debatable subject. Co-operative Housing Societies like other Co-operative Societies are mutual organizations and governed by Maharashtra Co-operative Society Act, 1960 in the State of Maharashtra.

The term, “Service” is first time given a statutory meaning from 1.07.2012 which encompasses almost all activities into its field and therefore it would be more appropriate to begin with examining the levy from 1.07.2012.

As per the definition, any unincorporated association or body of persons and a member thereof shall be treated as distinct persons. A Co-operative Housing Society and its members cannot claim benefit of mutuality in the transactions between them. Therefore, collections from members shall become liable to tax if they are in the nature of any activity carried out by the society for its members as provided in the definition.

The Housing Societies are liable to pay Service Tax on various charges, fees and other amounts collected from the members as per the clarification given by Jt. Commissioner of Service Tax, Mumbai under Ref No: V/ST/HQ/Tech/Ref-25/06/1956.

The applicable rate of tax at present is 12% plus 2% Education Cess and 1% Secondary and Higher Education Cess, aggregating to 12.36% on taxable service provided.

Service as defined in this Budget is that a service rendered by an unincorporated body or an entity registered as a society to own members by way of reimbursement of charges or share of contribution.

This is a Tax that the Society collects from each Member (Owner of the Flat or Villa), along with the Bill (e.g., Monthly Maintenance Bill). The Tax is paid to the Government on a monthly basis and returns are filed in a quarterly or half-yearly basis in Form ST‐3 i.e. for the period of April to September, the return would be required to be filed on or before 25th October and for the period October to March the return would be due by 25th of April. It is very important that the Treasurer of the Society should be aware about the entire process to collect the Service Tax from each member along with the bill and remit to the Government.  

If the billing of above charges exceeds Rs.5000/‐ per member, per month, service tax would be payable @ 12.36% and recovered in the bill. However, basic exemption is provided to any assessee for total receipt of taxable amount of Rs. 10 Lakhs (however, this exemption is optional).

Once the receipt exceeds the exemption limit, Service Tax is payable after deducting first Rs. 10 Lakhs in the subsequent year and thereafter, Service Tax is applicable every year without any exemption. However, if the tax is collected, exemption cannot be availed. If there are commercial units in the building, the Service Tax is applicable to the commercial units but has no exemption applicable. The exemption will be applicable for residential units only.  

Service Tax is payable on billing basis, i.e. even if a member does not pay the bill amount, Service tax will have to be paid by the Society.

The Society has to apply for the ST-1 and it should be filled.  It can be download the form by following the below link; http://www.servicetax.gov.in/forms/st1.pdf. The Secretary of the Society has to sign the application.

In order to complete the procedure, the following documents are required;

 Self-certified copy of the PAN of the Society/Association
A copy of Bye-Laws
A copy of resolution passed in GBM (reg. ST registration)
A brief write-up of the services provided
A Registration Certificate of the Society/Association

The following accounts are liable for Service Tax Payment

(i) Common Electricity
(ii) Repairs Maintenance of lifts
(iii) Service Charges
(iv) Car parking charges
(v) Insurance
(vi) Charges for health club, swimming pool, etc.
(vi) Use of terrace etc for functions to non-members
(vii) Sale of terrace space and compound for hoardings

The following accounts are not liable for Service Tax Payment

(i) Property Tax
(ii) Water/Sewerage Tax
(iii) Contribution to Repairs & Maintenance Fund
(iv) Major Repair Fund
(v) Contribution to Sinking Fund
(vi) Interest on defaulted charges
(vii) Repayment of loan and interest
(viii) Non-occupancy charges
(ix) Lease Rent
(x) Non-Agricultural Tax
(xi) Admission /Entrance Fees
(xii) Issue of shares
(xiii) Deposits
(xiv) Premium on Transfer of Flat
(xv) Voluntary donations

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