Query: Liability in case of co-operative commercial society
The querist is premises co-operative society. It has industrial galas and members carry on commercial activity in the same. It is considering itself as exempt from GST on the ground that the monthly maintenance charges are less than ₹ 7,500/- p.m. per member. The society (Querist) seeks to know wether the exemption claimed is correct and if not, the incidental issues may be answered as specified below.
Issue 1. Querist is not charging GST as Maintenance charges are below ₹ 7500/- per month, per member. The actual Maintenance charges are ₹ 2750/-. Issue is, whether Exemption of GST available to Commercial Society or Not?
Reply 1: The exemption of ₹ 7500/- per member, per month is available in respect of Co-operative Housing Society. This is clear from relevant entry.
The relevant entry is entry 77 in Notification No.12/2017 -Central Tax (Rate) dated 28.6.2017.
The said entry is reproduced below for ready reference.
Chapter, Section, Heading, Group or Service Code (Tariff)
Description of Services
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 Goods and 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.
(Subsequently ₹ 5000/- changed to ₹ 7500/-)
As per clause (c), the exemption of ₹ 7500/- is restricted to housing society or Residential Complex.
Having this clear position, exemption of ₹7500/- is not available to industrial premises co-operative society, as the said society is a premises society and not housing society.
Issue 2. If GST is to be paid for past period, whether GST has to be paid along with interest and penalty?
Reply 2: Paying voluntarily before any notice is issued will save Querist from penalty. In other words paying tax and applicable interest voluntarily will be advisable and penalty will not be applicable.
Issue 3. Now, Querist Society has decided for Major Repair work of whole building and Querist has to pay huge amount of GST on Major Repairs expenses. Can the Querist get credit of GST paid on Major Repairs of the building or tower repairing? Such credit can be carried till what time?
Reply 3: Yes. Tax paid on repair/ maintenance is eligible for ITC. However, such expenses should be debited to Income & Expenditure A/c as expenses and should not be capitalised in Building A/c etc..
ITC can be used without limitation of time and it can be used till it is exhausted.
Issue 4. If applicable and Querist charges GST on the Maintenance charges to members, being a commercial society, whether GST paid on Maintenance and Repairs is allowed as input credit or not?
Reply 4: Yes, as stated above, ITC is available on repair/ maintenance expenses. Credit so available on repair expenses can be utilised till it gets absorbed. There is no time limit on use of same.
ITC in credit ledger can be used for discharge of any outward liability.
Issue 5. Input Credit will be adjusted without any time period? Or Querist has to utilize in same financial year?
Reply 5: The ITC can be used for any future period till it gets fully exhausted. There is no time limit for use in same financial year etc..
Issue 6. Whether credit of GST on Major Repairs can be adjusted against liability on rent received for Mobile Tower or not?
Reply 6: Yes. The ITC on major repairs can be used against liability on tower rent.
Issue 7: If GST is paid by Querist on maintenance charges, can recipient members get input credit of GST amount in current period?
Reply 7: The GST charged for period from 1.4.2020 to 31.3.2021 will not pose any problem in claiming the ITC by recipient members as it will be before September, 2021. The issue may arise for the period prior to 1.4. 2020. Normally, the credit can be taken for year ended 31.3.2020 till due date for filing return of September, 2020. For period from 1.4.2019 to 31.3.2020, Querist will be required to collect GST by issue of Debit note in current period. There is debatable issue in respect of claiming ITC based on debit note.
Section 16(4) of CGST Act is amended from 1.1.2021. The amended section 16(4) reads as under:
“16. Eligibility and conditions for taking input tax credit.
‘(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.”
Based on amended section, it is believed that the ITC can be claimed as per Financial year of debit note, irrespective of year of invoice. As per above view since debit notes are raised in current period the credit can be taken in current period.
However, recently the Gujarat AAR has given Advance Ruling in case of M/s. I-TECH PLAST INDIA PVT. LTD. (2021-VIL-205-AAR) in which it is held that the debit note is to be related to year of invoice, irrespective of above amended position of section 16(4) of CGST Act. According to same the ITC to be taken as per time limits applicable to period of invoice and not as per period of debit note.
The Advance Ruling is not binding on other cases. However, it has persuasive value and the department authority may follow the same.
The net result is that the position is debatable. However, I am of opinion that the recipient can take ITC as per period of debit notes and if at all any issue arises it can be contested based on above amended position. With respect, Gujarat AAR may be reconsidered in future.
Issue 8. What is the interest and penalty amount for non-payment of GST as above?
Reply 8: If paid voluntarily before issue of notice, there will not be question of penalty. However the interest will be payable @ 18% p.a.
Here also there is debatable position. One can take a view that since the tax is collected by Debit note in current period and paid in time limit of said period of collection, no interest can be attracted.
However, looking to Scheme of CGST Act, the interest is contemplated from the period in which tax was payable. The tax was payable in respective previous periods. The delay therefore should attract interest. In my opinion the interest is payable. However even if it is not paid in current period, there will not be any issue. Since tax liability is paid the interest gets crystallised as per such date. There is no interest on interest. So even if not paid and department raises any objection in future querist can defend the same as not payable, as per position explained above. If at all interest payable is assessed, the quantum will be same, as payable today and querist can pay the same at that time. If on conservative view querist wants to pay in the return of current period along with tax then interest can not be adjusted against ITC and querist has to discharge the same by cash payment.
Issue 9. Which heads come under GST exemption list like Maintenance charges, Water charges, Electricity charges, Sinking Fund, Non Occupancy charges, & Interest and penalty for late payment by members, Property Taxes, Equitable charges as per the Bye Law, etc?
Reply 9: Water charges, property tax will be out of levy of GST. Electricity is not charged separately hence it will get merged in maintenance charges and will be liable to GST.
In respect of sinking fund, there are two views, one saying the same being advance against future repair, it is taxable. The other view is that it is in nature of deposit and hence tax to be paid as and when used towards services.
In my view, taking conservative view, it will be better to charge GST on sinking fund. The recipient will be entitled to ITC, hence no actual burden on members. Other items are liable to GST.