How to deal with GST Impact on Housing Societies?

Every person who is making a taxable supply i.e. supply of goods & services which are leviable to tax under GST & his aggregate turnover in a financial year exceeds 20 lacs shall be liable to register himself in the respective state. This limit is relevant for housing societies also.

This threshold limit of aggregate turnover is 10 lacs in case of 11 special category states.

The GST tax structure on housing societies

As per this provision, every housing society having receipt above 20 lacs or 10 lacs as specified shall be required to get registered under the GST. That means if a housing society collects the maintenance fees from it’s member whose aggregate exceeds 20 lacs or 10 lacs irrespective of the membership fees per member less than 5000.

The Current tax structure on housing societies

Currently the housing societies are covered under the provision of Service Tax. All apartment owners whose contribution exceeds 5000 per member & total turnover of society exceeds 10 lacs are required to be registered under Service Tax & pay the same.

Advantages of Registration under GST 

GST provided input tax credit benefit for all the goods purchased or services availed by the society i.e. Lift, AMC, Housekeeping, Security, Fire AMC, repairs & maintenance, Contract Staff, Accounting & Auditing Services, Software Portal & other services.

Based on the above write up below is the summary & few queries on housing societies

1.Whether any exemption will be available on the basis of turnover?

Ans. Yes, if the Society’s aggregate receipt of the turnover is less than 20 lacs then, it is not liable to get registered under GST .

If aggregate receipt is more than 20 lacs but less than 75 lacs then, they can opt for composition scheme.

If the aggregate receipt is more than 75 lacs then they are fully covered under GST.

2.Will the billing or Invoice format of the Society have to be changed?

Ans. Yes, the format will be changed & it will be in the format given in the link Invoice Format.

3. Will the method of Accounting be changed ?

Ans.Yes the method of Accounting will be changed, since expense side benefit will be availed only when tax on those expense has been paid therefore there will be major change in recording entries.

4. Will the input tax tax credit be available on all the expenses incurred by the society?

Ans. Yes in all those expenses where input tax is paid, however not in Electricity, Stamp Duty.

5. Will the reverse charge mechanism applicable to the Society?

Ans. On certain transactions it is expected that reverse charge is applicable on society like Security Services, Accordingly GST has to be paid first & then credit benefit may be claimed.

6. Will a separate Audit be required under GST ?

Ans. Yes, every registered taxable person whose turnover during a financial year exceeds the prescribed limit of 2 crores shall get his accounts audited by a chartered accountant.

He shall an annual return using form GSTR 9B along with reconciliation statement by 31st Dec. of the next FY.

Conclusion

Since under GST the definition of “person” & “business activity” has included Society in the charging section, that means society is also liable under GST based on fulfillment of condition. Therefore housing societies also have to comply with GST.

If you have any further question feel free to contact us.

References 

http://www.gst-insights.com

http://www. cbec.gov.in

 

Transitional provision under GST-Section 140

Whenever a new law is implemented there is also a parallel phase which talks, that how & what will be the treatment of carry forward of input credit benefits prevailing in existing regime. This issues under GST will be taken care by Transitional provision.

These provisions are covered u/s 140 of CGST Act.

The provision describe, how the input credit benefit of existing regime can be claimed under GST by all the businesses.

1. Sec 140(1) is for manufacturers only: All the manufacturers who were allowed credit in existing regime & such credit is admissible in GST Act too shall avail the credit under this section.

However the manufacturer should have filed the return for last 6 months from the appointment date to avail the benefit.

2.  Sec 140(2) is for Capital goods CENVAT credit: That proportion of CENVAT credit for capital goods, which was not availed & not carried forward in return.

3. Sec 140(3) is for credit of eligible taxes held in stock: This section is for all the businesses but essentially for traders who were not eligible to claim credit of excise duty, CVD, SAD & Service tax. This is on the fulfillment of following conditions:

Conditions to be fulfilled

  1.  Such Inputs or Goods are used or intended to be used for making taxable supplies;
  2.  Eligibility of credit on such inputs under this Act;
  3.  Possession of invoice/ documentary evidence of duty paid under existing law;
  4.  Such invoice/ documentary evidence was issued not earlier than 12 months immediately preceding the    appointed day;
  5. The supplier of services is not eligible for any abatement under the GST law.

4. Sec 140(4) is for credit of inputs held in stock in certain situations :

A registered person who was engaged in manufacture of taxable/ exempted goods or providing taxable/ exempted services, but which are liable to tax under current Act shall be entitled to take credit-

  1. Cenvat credit c/f in his return [as per sec 140(1)]; and
  2. Cenvat credit of eligible duty in respect of inputs-relating to exempted goods or services [as per Sec 140(3)]

5. Sec 140(5) is about credit of input taxes in respect of goods & services which are in transit

A registered person-

  1.  Shall be entitled to take credit of eligible duties and taxes
  2.  In respect of inputs/ input services received on or after the appointed day
  3.  The duty or tax is paid before the appointed day
  4.  Provided the invoice is recorded within 30 days from the appointed day, and
  5.  A statement is also required be furnished in respect of such credit.

6. Sec 140(6) is for dealers who want to switch from composition scheme to GST. Such dealers shall also be allowed the credit on fulfillment of following condition for all the category of goods held in stock on the appointed day:

Conditions to be fulfilled

  1.  Inputs/Goods used for making taxable supplies under GST Act;
  2.  Registered Person is not paying tax under composition scheme of GST Act;
  3.  Registered Person is Eligible for ITC under GST Act;
  4.  Possession of invoices;
  5.  Invoices were issued not earlier than 12 months immediately preceding the appointed day

7. Sec 140(7) is for Input Service Distributor where it has received the services before the appointed date, even if invoices are received later on.

8. Sec 140(8) is for registered person having centralized registration under existing laws is allowed to take credit of CENVAT.

Conditions to be fulfilled

  1. Amt. of Cenvat credit shall be amount carried forward in a return furnished for the period ending with day immediately preceding the appointed day.
  2. If such return is furnished within 3 months of the appointed day, then credit shall be allowed only if such return is an original or revised return where the credit has been reduced from that claimed earlier.
  3. Credit allowed only if admissible under GST Act.
  4. Such credit may be transferred to other registered persons having same PAN.

There are formats for Transitional Provisions called as Transition Formats used to carry forward & avail the credit of existing regime.

The formats are captured in the link below

References for Transitional Provision

http://www.cbec.gov.in/resources//htdocs-cbec/gst/transition-formats-04062017.pdf

Link for Credit Transfer Document

http://www.cbec.gov.in/resources//htdocs-cbec/gst/proposed-CTD-doc-04062017.pdf

http://www.gst-insights.com

Thanks,

Bhawana

 

Composition Scheme under GST

Under various laws there is a provision of Composition scheme which is for the small businesses & in GST also to make compliance easier Composition Scheme for many startups and Small & Medium Enterprise (SMEs) has been introduced.

To know where does these composition scheme applies & it’s further compliance s, read as under:

  1. Any dealer whose aggregate turnover in a financial year does not exceed Rs. 75 Lakh can opt for composition scheme.
  2. Businesses dealing only in goods can opt for composition scheme. i.e. A service provider is mandatory required to get registration under GST without looking to the limit of 19 lacs.
  3. The person who is in the business of providing services cannot opt for this scheme. However, restaurant sector taxpayers may also opt for the scheme( if annual turnover is below Rs 75 Lakhs).
  4. The tax rate in this scheme shall be 1% for manufacturer, 2.5% for restaurant sector and 0.5% for other suppliers of turnover.
  5. Any taxable person covered under Reverse Charge Mechanism cannot opt for this scheme.
  6. A Composition Dealer is not allowed to collect composition tax from the buyer.
  7. Composition Scheme is available only for dealers who are doing business in a single state.

Compliance s for such dealer 

  1. A taxpayer who is opting composition scheme will be required to file one return on quarterly basis by 18th of following month.
  2. Such dealer cannot issue a tax invoice.
  3. A buyer from composition dealer will not be able to claim input tax on such goods, which leads to increase in cost of buyer from such dealer.

Limitation of Composition Scheme:

  1. No Input Tax Credit allowed to whosoever dealing with this dealer.
  2. Even a single rupee Inter State Transaction if happened will not be eligible for composition scheme.
  3. Though the tax rate is very minimal of 1%, 2.5% but that is the burden on the pocket of the composition dealer.
  4. Wrong claim under composition scheme shall lead to heavy penalty i.e. such a person shall be liable to pay all the taxes which  he would have paid under the normal business.

Treatment of Closing Stock of Existing Composition Dealer:

The credit held in Closing Stock of existing composition scheme dealer shall be eligible for credit on the day immediately preceding the date from which they opt to be taxed as a regular tax payer.

Conclusion:

Therefore we suggest that composition scheme shall be availed only by very small scale traders whose complete business is limited to a single state & below 75 lacs i.e. only for B2C businesses. 

Though govt. may, by notification increase the limit but does not exceed 1 crore, as may be recommended by the council

References for Composition Scheme:

http://www.gst-insights.com

http://cbec.gov.in

Best,

Poonam