The implementation of the Goods and Services Tax (GST) has had a significant impact on various sectors, including co-operative societies. While there is a general understanding of GST applicability to co-operative housing societies, a common area of confusion arises regarding commercial premises co-operative societies. This blog explores the applicability of GST to commercial premises co-operative societies, analyzing the constitutional provisions, nature of activities, and specific charges collected from members that attract GST.
GST Applicability – An Overview
GST is a destination-based tax levied on the supply of goods and services. Under the GST framework, co-operative societies fall under the definition of ‘persons’ as per Section 2(84) of the CGST Act, 2017. Therefore, transactions carried out by a co-operative society are considered as taxable supplies, subject to certain exemptions.
Constitutional Provisions & Commercial Premises Co-operative Societies
Article 246A of the Constitution grants the central and state governments the power to levy GST on goods and services. Co-operative societies providing services to their members are considered ‘suppliers of services,’ making them liable to GST if their turnover exceeds the prescribed threshold limit of ₹20 lakhs (₹10 lakhs for special category states).
Unlike residential housing societies, which are primarily formed for the welfare of residents, commercial premises co-operative societies function to manage and maintain commercial properties where the premises are used for business activities. This fundamental distinction impacts their GST liability.
Non-Applicability of Exemption under Notification No. 12/2017
Notification No. 12/2017 – Central Tax (Rate) dated June 28, 2017, provides an exemption from GST for services provided by a resident welfare association (RWA) or a co-operative housing society to its members when the contribution per member does not exceed ₹7,500 per month. However, this exemption is explicitly applicable to housing societies and not to commercial premises co-operative societies.
Since commercial premises co-operative societies cater to business entities and facilitate commercial activities, the services provided by them are treated as taxable under GST, making them ineligible for the above exemption.
Charges Collected by Commercial Premises Co-operative Societies and GST Implications
Charges liable to GST:
The following charges collected by a commercial premises co-operative society are generally subject to GST at the rate of 18%:
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Maintenance Charges
Covers security, housekeeping, upkeep of common areas, water supply, etc. -
Sinking Fund Contributions
Since these funds are meant for future repairs and major maintenance, they are considered as consideration for services. -
Parking Charges
Charges for renting out parking spaces are considered a taxable supply. -
Non-Occupancy Charges
If levied separately on members not utilizing their premises, these attract GST. -
Facility Usage Charges
Charges for using conference rooms, business lounges, and other shared commercial facilities. -
Reimbursement of Statutory Dues
If the society merely collects and remits taxes like property tax, water tax, etc., without adding any markup, GST may not be applicable. -
Interest or Penalty on Late Payments
These are be subject to GST
Conclusion
The GST applicability on commercial premises co-operative societies differs significantly from housing societies. Due to the nature of commercial activities and the absence of exemption under Notification No. 12/2017, commercial societies are required to levy GST on various charges collected from members. It is advisable for such societies to obtain GST registration if their turnover exceeds the prescribed threshold and to ensure proper compliance to avoid penalties. Businesses operating in commercial premises co-operative societies should also be aware of their input tax credit eligibility on the GST paid to the society.
For professional guidance on GST compliance and tax planning for commercial premises co-operative societies, consult a qualified Chartered Accountant.
