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

 

GST hit Amazon, Flip kart and likewise with: TCS and Other Compliance

  1.  Meaning of E-commerce and E-commerce operator :

Under Model of  GST ‘electronic commerce’ means supply of goods and/or services including digital products over digital or electronic network.

Under Model of GST ‘electronic commerce operator’ means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

     2.   Who are liable to Register in case of E-commerce?

Categories of person are as follows:

a) E-commerce operator who are required to collect tax (TCS) on the net invoice value after deducting commission and GST.

b) person who supply goods and/or services

c) every electronic commerce operator like Amazon,Flip kart,Snapdeal, irrespective of threshold limit

d) every person who supply online information and database access or retrieval services from a place outside India to a person in India.

     3. Levy and Collection of Tax:

Electronic commerce works as a channel or medium for supply of goods or services from supplier to buyer. Currently, most e-commerce companies like amazon , flip kart operating in India are acting as a marketplace, providing services such as marketing, technology support, warehousing and logistic support to the sellers

Existing Law:

 The concept of an “aggregator”, says e-commerce company must pay tax on services provided by service providers under the brand name of the e-commerce company. However, the sector strongly opposes the imposition of this levy as they stand on the view that vendor should comply all the provisions related to supply of goods and/or services and that no liability should accrue to e-commerce players.

View of judiciary in case of VAT on e-commerce:  In recent landmark case of Flipkart Internet (P.) Ltd. Versus State of Kerala [2015 (11) TMI 159 – KERALA HIGH COURT] , it was held that assesses who was an online service provider is not liable to pay any VAT liability and file returns as department’s view that the situs of the virtual shop can be traced to Kerala is legally flawed. The same view is upheld by Karnataka High Court.

Proposed GST Law:

But under Revised model GST law issue is still not resolved as  levy of tax on e-commerce players is still liable for the specified category of services to be notified. Tax shall be paid by the operator for all the services supplied through it like

marketing,

warehousing

packing

delivery

As GST era proposed to have separate registration on a state-by-state basis, complying with this requirement of registration for separate states will create problems for this industry. No exception has been made in proposed law for centralized registration.

4.   TCS compliance for e-commerce sector:

E-commerce aggregators are made responsible under the GST law for deducting and depositing tax at the rate of 1% from each of the transaction. Any dealers/traders selling goods/services online would get the payment after deduction of 1% tax.

It is a significant change which would increase a lot of compliance and administration cost for online aggregators like Flipkart, snapdeal, amazon etc.

The TCS amount collected by the operator shall be paid to the account of the appropriate government within 10 days from the end of the month in which such collection is made.

For Example: Mr. Akash a is a trader who sells Electronic products online. He receives an order for Rs 10, 000 inclusive of tax and commission. Amazon charges a commission of Rs 200. Amazon would therefore need to deduct 1% tax (TCS) on the amount, excluding the money paid as commission (Rs. 200) and GST ( Rs. 1200 when GST @12%). Amazon would thus be deducting tax for Rs 86 (1% of Rs. 8600).

5. Filing of Return (GSTR-8) for operators:

E-commerce companies  will also have to file return(called as statement) and contains the following information:

a) Amount of TCS deducted

b) Outward supply of goods or services effected through operator

c) Return of goods or services through operator

TCS return has to be filed by the operator within 10 days after the end of each month containing above information.

6.   TCS credit to supplier

The amount shown by the operator in its monthly filed statement will be available as a credit to the supplier who has supplied the goods or services through such operator.

Credit will be available to the supplier in his electronic cash ledger of the same amount which reflected in the statement filed by operator.

References:

section 24 : Person liable to be register under GST

Section 2(45) : Definition of Electronic Commerce Operator

Section 2(44) : Definition of Electronic Commerce

clause X of Schedule V of Model GST Law :List of persons require registration

TCS under section 52 :TCS compliance

Section 52(4) : Filing of return

Written by:

Poonam Kanwar

(GST Associate)