BY CA RAJKAMAL SHAH
SERVICE TAX ON CO – OPERATIVE HOUSING SOCIETIES
Q1. Whether Service Tax is leviable on Co – operative Housing Societies on re –
imbursement of charges or share of contribution from its members?
1A. Yes, every person who provides any activity to another for a consideration is
liable to be taxed under Service tax from 1.07.2012. Further, in case of an
unincorporated association or body of persons and a member thereof shall be
treated as distinct persons. Thus the concept of mutuality does not apply to
service tax. This is provided in the definition of Service in S. 65B (44).
However, Entry 28 of exemption notification no. 25/2012-ST dtd. 20.6.2012
exempts service by a co – operative housing society to its members in the
following way,
“Service by an unincorporated body or a non- profit entity registered under
any law for the time being in force, to its own members by way of
reimbursement of charges or share of contribution (a) As a trade union;
(b) For the provision of carrying out any activity which is exempt from the levy
of service tax; 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;”
Q2. From which date it is applicable?
A2. Prior to 01.07.2012 Service tax was leviable under Club or association service
from 16.06.2005. The definition of taxable service u/s 65 (105) (zzze) covered
any service provided or to be provided by a Club or Association in relation to
provision of Services, facilities or advantages for subscription or any other
amount. The definition of Club or association of service contained in S. 65
(25a) covered services by Co – operative societies to its members.
Q3.Is there any change in the provisions of the Law from 01.07.2012 so far as levy
of Service tax on Co – operative Housing Societies is concerned?
A3. Yes, in the negative list based taxation regime of service tax from 01.07.2012,
the definition of service is provided and all activities are taxable if it falls
within the definition of service.
Q4. What is the definition of Service?
A4. The Service defined u/s 65 B (44) is all encompassing as, “any activity carried
out by a person for another for consideration….” However, it excludes certain
activities, viz., i) a title of transfer in goods including deemed sale of goods
under Article 366(29A) of the Constitution of India, ii) a transaction in money
or iii) actionable claim or, iv) provision of service in the course of
employment, etc.
Q5. Is there any exemption provided for collections from members by a Co –
operative Housing Society?
A5. Yes.
Q6. Can you explain the exemption with examples?
A6. The exemption is for provision of carrying out any activity which is exempt
from the levy of Service tax. The activity relating to electricity, water is
regarded as goods and may be held as excluded from the definition of service.
Further, though there can be different views, in the opinion of the writer, the
following collections may also be excluded, for example,
Municipal Tax
Sinking Fund
Repair fund (except for current repairs)
Share money
Water Chargers (except for common use of the society like garden etc).
The following collections is liable to be taxed if monthly bill to the member
exceeds Rs. 5000/-. The examples are:
Maintenance charges
Current repairs charges
Water charges for common usage like garden, swimming pool, etc
Common electricity charges like road or passage lights, lifts, etc.
Club membership fees
Share transfer fees and donations
Q7. Has the Government issued any clarification with regards to taxability of
amounts collected by the societies from its members?
7A. In the Education Guide issued by the Government has clarified that if a service
is provided on actual reimbursement basis or without any mark-up for
procuring any goods or service from a third person, the amount collected by
the Co-operative Housing Society from its members may be excluded from
the value of taxable service under the Valuation Rules, if the society is acting
as pure agent and other conditions are satisfied.
Q8. When registration under Service tax has to be taken?
A8. The co – operative housing society will have to take registration within one
month from when the taxable service crosses Rs.9 Lakhs billing in a financial
year.
Q9. Is there any basic exemption limit?
A9. Basic exemption is provided to any assessee for total billing of taxable amount
of Rs. 10 Lakhs in the immediately preceding year.(however, this exemption is
optional). In the subsequent year, service tax would be chargeable from the
beginning. However, in case in any subsequent year the total billing is within
the exemption limit of Rs. 10lakhs, the exemption would be available in the
year following thereafter. However, if the tax is collected or Cenvat credit is
used, exemption can not be availed.
Q10. What are the provisions for applicability of Service tax on Premises Co –
operative Societies?
10A. Unlike Co – operative housing societies, exemption upto Rs. 5000/- per
member per month is not available to the premises co - -operative societies,
i.e. the societies of commercial premises. However, the exemption in cl. (b) of
Entry 28 of the mega exemption1 as mentioned above is still available to them
and re-imbursement of charges or share of contribution from its members for
carrying out any activity which is exempt from the levy of service tax will not
be included for the purpose of service tax for such societies. Please refer to
Para 6A above.
Q11. Whether Service tax is payable even if the bill amount is not received from the
members?
A11. Yes. 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.
Q12. At what rate is Service tax payable and on what amount?
A12. 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,
one view is that if the charges exceeds Rs. 5000/-, Service tax would be
payable from Re. 1/-. In the opinion of the writer, service tax would be
payable only on the amount which is in excess of Rs. 5000/- per member per
month.
Q13. What is the due date of payment?
A13. Service tax is payable on monthly basis, i.e. by 5th of the next month or 6th in
case of e – payment. (e – Payment is compulsory in case of societies)
1
Notification no. 25/2012-ST
Q14. What is the due date for filing Service tax returns?
A14. Service tax returns to be filed on half yearly basis in the following manner :
For the period from 1st April to 30th September – by 25th October
For the period from 1st October to 30th March – by 25th April.
Q15. Is there any form prescribed for returns?
A15. Yes, Form ST – 3 is prescribed for returns.
Q16. Whether the return is to be submitted manually or electronically?
A16. The return is to be submitted electronically.
Q17. Whether the society would be entitled to take credit of Service tax paid on
Input service or goods or capital goods?
A17. Cenvat credit can be availed on payment of Service tax on input services, like
Security, Repairs & Maintenance, etc. Cenvat credit is also regarded as
payment of service tax like payment by cash or cheque if, availed in
accordance with the Cenvat Credit Rules 2004. It can also be availed if excise
duty is paid on goods or capital goods used for providing service by the
society. However, normally the societies do not use any goods or capital
goods for providing service.
Q18 On what basis the Cenvat Credit can be allowed?
A18. The credit can be taken on payment basis, i.e. when payment of input service
and service tax is paid to input service provider. Cenvat credit can also be
availed on the basis of receipt of invoice of input service or goods or capital
goods. But if the payment is not paid within 3 months, the Cenvat credit
needs to be reversed and interest is payable thereon. Cenvat credit can again
be taken on actual payment of the bill.
Q19. Whether the society would be required to make payment as receiver of
service?
A19. In case of transportation of goods by road, where the society is a consigner or
consignee and pays the freight. It may be noted that no basic exemption limit
is available in case of payment under reverse charge.
Q20. What records are to be maintained for compliance of Service tax
provisions?
A20. i) Monthly bill register showing name, address, bill amounts (broken into two
columns, i.e. taxable and not taxable amounts) and Service tax, bill numbers
(serially) and date of bill.
ii) For availment of Cenvat credit Register is required mentioning the details
of the input service provider, viz. name and address, bill no., date, description
of service, amount of bill, service tax amount and date of payment.
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