Service Tax for Co-operative Housing Societies

Service as defined in this Budget:

“Service by an unincorporated body or an entity registered as a society to own members by way of
reimbursement of charges or share of contribution:–
(a) …………….;
(b) for the provision of exempt services by the entity to third persons; 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; “

1. Every Society needs to re-calculate whether it is under Service Tax purview or not. [Update on 16-June-2012]

2. Exemption of Rs.5000/month/member. An owner of Multiple Flats will almost always exceed this.

3. Almost all Income Heads will come under Service Tax purview, including Funds, Utility charges etc.

The service tax for the housing societies is paid by a resident of the welfare association of a registered co-operative society for various services provided. Each of the housing society members will have to contribute Rs.3000 per month. In most cases the service tax is paid to the contractors & suppliers. There is an exemption under Noti.8/2007, if the monthly payment per member does not exceed Rs.3000/-.

The essentials of the service tax for housing societies;

      The budget this year has implied service tax registration on all the members of a housing society and whose income is above Rs.10 Lakh/year.

·         It is important that each society has to re-calculate if it is under service tax purview or not.

·         The budget states that almost all the income heads will come under service tax purview which includes the funds, utility charges and so on.

·         There will be an exemption of Rs.5,000/month/member and a person owning multiple flats will have to exceed more than this amount.

·         The service tax for housing societies is paid for the provisions of exempt services by the entity to third persons.

·         The service tax is paid in an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use in a housing society or a residential complex.

·         It is very important that the treasurer should be aware about the entire process wherein the treasurer will collect the tax from each member along with the bill. The tax then is paid to the government on a monthly basis and returns are filed in a quarterly or half-yearly basis. The tax rate this year was changed to 12.36%. 

·         The societies which collect more than Rs. 3000 per month for a flat/apartment are taxable and the due date would be before 01-July-2012.

·         All apartment owners association registered societies which are providing services to their members based on the maintenance of the common areas, running and operation of the common utility services by sourcing the goods and services from third persons are liable to pay the service tax from 01-July-2012.

·         The income heads which are taxable before 1-July-2012 are societies with followed guidelines from their respective auditor. They ranged from highly conservative to highly liberal ones.

·         The income heads which are taxable from 01-July-2012 are the ones which levy charge to their members through ways of reimbursement of charges or share of contributions.

·         The exemption is in respect of reimbursement charge or share of contribution with an amount of Rs. 5000/- pm per member.

·         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.

·         The power of attorney can be given to the agent in case the president/secretary is not filing the application.

·         An acknowledgement is received after filing the application. The registration certificate will be received in 7 days.

·         To perform the registration process, one can seek the help of a company secretary or the chartered accountant/agent.