GST @18% applicable on CHS w.e.f 1st July 2017

Truth is here, the change is inevitable, so better embrace it rather than complaining.

Goods and Services Tax (GST) is one major reshuffle in the Indirect Tax Structure being implemented on the entire nation, which eliminates multiple tax entities and consolidates all of them into a single tax entity. A lot of discussions are floating across various forums about whether or not CHS would fall under the purview of GST, the reality is it does.

No New Taxation:
Pre-GST, all CHS were falling under the Service Tax net, if the Maintenance collection was more than Rs. 5,000/- per member/ per month and/or if total annual collections were over the prescribed turnover limit, the same provision has now been incorporated in the GST, since w.e.f 1st July 2017, Service tax will cease to apply.

Increase in Tax Rates:
Yes, What’s going to change is the tax rate, the applicable GST is chargeable @18%, so definitely the tax burden is bound to increase, but with the wide tax base of GST, I think eventually the Government revenue will increase and there is a probability of rationalization of taxes, so we can hope for a rate cut, in coming years, once GST gets settled across the Nation. Another benefit under the GST is that the annual turnover limit is enhanced to rupees twenty Lakhs.

Taxing Provisions:
Section 2(84)(i) covers Co-operative Society under the definition of “Person”, similarly Section 2(17)(e) covers Co-operative society under the definition of term business.

As per Chapter VI Section 22(1), Every supplier shall be liable to be registered under the Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds Twenty Lakhs rupees. While gazette notification with regards to GST isn’t released yet, it is amply clear from GST council approved rates that if Maintenance collection is more than Rs. 5,000/- per member per month and if total annual collections are over 20 lakhs, then the CHS needs GST registration & needs to charge GST to members & also file its returns.

Further as per section 15(2)(d) of GST Act, interest charged on the delayed payments by members would attract GST @18%, also any income received in form of rent from any hoarding / cell phone tower etc, will fall under the GST Tax net.

Once the Gazette Notification is issued more clarity is expected, however for now, we anticipate that Municipal Taxes, Water Charges, N.A. Taxes, Sinking Fund and Repairs Fund may be kept out of the purview of GST. Interest received from Banks on Fixed Deposits is excluded from GST.

Due dates of filing returns under GST:
Though the Government has assured smooth process, the compliance for CHS is bound to increase; the due dates under the act are as under:

  • Outward Supplies of Goods/ Services – to be filed by 10th of following month.
  • Inward Supplies of Goods/ Services – to be filed by 15th of following month.
  • GST to be paid & Monthly Returns to be filed by 20th of following month.
  • Self certified Annual Returns to be filed by 31st December of the following financial year, however if the aggregate turnover exceeding Rs 1 Crore, the return will have to be certified by a Chartered Accountant.

My Conclusion on GST is that it will bring transparency not just in the housing sector, but in all fields of commercial activities as every transaction will be easily tracked and taxes will now be levied only on consumption of goods and services, further I expect that the incidents of tax evasion will be lower in the present cashless economy, this will largely benefit the implementation of GST & towards development of the Country.

-      Adv. R. P. Rathod.