GST on Cooperative Housing Societies unjustified
There is no basis to levy any GST on Co-operative Housing Societies (CHS) or their members living in Flats/ Apartments: Societies are run on the concept of Mutuality as upheld by Hon'ble Supreme Court that no tax could be levied on organisations running on mutual benefit basis. Then why is GST slapped on CHS in India?
1) CHS works on no‐profit, no‐loss co‐operative model. Here, services are received by members from the elected members of the society. People don't have any alternative but to live in a CHS. When CHS is formed by members, they do it out of necessity and not for entertainment or for profit. Housing is a basic necessity for people. Society collections are only receiving reimbursement of actual expenses from the people who are supposed to bear them. Slapping 18% GST on member contributions is simply a bad idea emanating from bureaucratic machinery having no experience of CHS movement. There is no basis to levy any GST on CHS.
2) CHS has a very minimum administrative structure. Its Managing Committee members work as volunteers without any salary or compensation while engaging in full time jobs or business. Most of CHS are unable to get qualified staff on salary because the government has failed miserably in creating proper training facilities. Although the recent amendment of 2013 provides for training but so far hardly anything exists in reality. CHS of any size is just not equipped to handle calculations of GST on member collections or calculation of GST on Services rendered to them by unregistered service providers under Reverse Charge Mechanism and filing of 37 GST returns.
3) Service Tax sought to be levied on CHS was set aside by a tribunal in a February 2015 order. Here is an excerpt from
the full report – ‘In a recent landmark decision in the case of Matunga Gymkhana, Tahnee Heights CHS Ltd (reported
in STO 2014 CESTAT 792), the Mumbai Tribunal has held that Services to members of club/co‐operative housing society is not a service by one to another and therefore it is not chargeable to service tax’. Therefore, our demand is that GST should be scrapped on CHS immediately.
- CA B. M. Chaturvedi - CA Y. M. Agarwala
Recently, I had attended one seminar organized by a group of Chartered Accountants in Mumbai. It was a brainstorming session amongst hundreds of people. It was a question-answer session and five qualified professionals were answering the various questions raised by the members.
One of the participants raised the following questions -
“Is GST attracted on co-operating housing societies (CHS) or on their members living in flats or apartments?” “Are social service organizations like Rotary Club or Lions Clubs or Giants Clubs required to obtain registration under the GST Law?”
The members present on the stage were of the opinion that if the annual collection of a housing society or a club exceeds Rs.20 lakh and collection per member exceeds Rs.5000 per month, it is obligatory for a housing society or a club to have registration and carry out the compliance. According to me, there seems to be a misinterpretation of the law or subject. I feel that one should make an attempt to understand, analyze the background and services provided by these organizations in a proper manner. Whatever may be the reason or justification for the levy of GST, the authorities should take into consideration the basic structure and objective of the body, whether for profit or not before levying GST.