GST on Co­op­er­a­tive Hous­ing So­ci­eties un­jus­ti­fied

Money Times - - Forum -

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.

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