GST on collection of membership charges & reimbursement from the members of cooperative society

 

1.0 Introduction

As we had so many questions regarding the charges of GST in co-operative societies, the government has issued a circular to answer some of the most asked questions.

As said, GST is still a mystery for most of the taxpayers and therefore, people are not taking steps until and unless they are 100% sure. This is because if they do it anything wrong then the fines and penalties shall follow.

Therefore, in order to provide clarity to the subject matter, the government has issued a FAQ based circular which has been discussed below.

 

#Query No.1 – GST on collection of membership fees from the members

The society collects the charges from the members on a quarterly basis which is being used for Property tax- actual as per Municipal Corporation of Greater Mumbai (MCGM), water tax, electricity charges etc. The fund is also collected for the following:

• Sinking fund (Mandatory under the bylaws)
• Repair and maintenance fund.
• Car parking charges
• Nonoccupance charges
• Simple interest for late payment

Now, the question arises as to on which amount the GST shall be charged?

Solution: Since the question is long so the government decided to answer the same in two parts which are as follows:

• Where the collection is on account of property tax, water tax if collected by RWA or cooperative society from individual flat owners then GST shall not be leviable. Further, the GST is not leviable on Nonagricultural tax or electricity which are collected from the individual flat owners.

 

However, if the society is collecting charges to provide electricity from own generators, or by drinking water facilities or any other service, then such charges collected by the society are liable to GST.

 

• Sinking fund, repairs & maintenance fund, car parking charges, simple interest etc shall attract GST as these charges are collected by RWA/cooperative society for supply of services meant for its members.s

 

#Query No.2 – As per the GST exemption notification, no GST shall be charged on maintenance charges up to Rs.5000

As per notification exemption issued by the Central Government, the GST shall not be applicable on maintenance charges up to Rs.5000. Was this exemption little confusing hence kindly explain?

 

Solution: The exemption is actually little confusing and therefore government elaborate the same through the FAQ which is as follows:

• As per the government, the exemption shall be applicable only where reimbursement charges or share of an amount up to Rs.5000 per month per member is used for sourcing of goods and services from the third party for the common use of its members.

Here charges mean the individual contributions made by members of the society to avail services or goods by the society from a third party for common use.

 

#Query No.3 – The monthly collections are below Rs.5000 but the yearly collection is more than Rs.20 lakh

The society further states that the monthly collections are below Rs.5000 but the yearly collections are more than Rs.20 lakh, whether GST shall be applicable or not?

Solution: Reimbursement of charges or share of contribution up to an amount of Rs. 5000/- per month per member for sourcing of goods or services from a third person for the common use is not liable to GST.

However, if the Cooperative society/ RWAs provide specific services of its own to its members or to any third party (e.g. use of community hall for social function by a non-member) cumulatively exceeds the threshold limit as per GST, then GST is leviable on such supply of services.

 

2.0 Conclusion

We have tried to explain the FAQs on cooperative societies and in case you have any query, you may please email us at info@hubco.in.