The impact of budget 2012 on service tax for housing societies
With the initiation of new policies in the budget 2012 former this year, there have been many changes even in the service tax payment of the housing societies. The service tax law which is applicable to the apartment owners associations or the co-operative housing societies has witnessed drastic changes.
What is service tax?
This is the tax which has to be paid for the services provided by the service provider. Service tax is similar to the excise duty. This tax which is paid by the customer is in turn paid by the service provider to the government of India. The service provider can also collect the tax from the customer of service and pay it to the government.
Similarly the service tax for the housing societies is paid by a resident of the welfare association of a registered co-operative society for various services provided. Each of the housing society members will have to contribute Rs.3000 per month. In most cases the service tax is paid to the contractors & suppliers. There is an exemption under Noti.8/2007, if the monthly payment per member does not exceed Rs.3000/-.
The essentials of the service tax for housing societies;
- The budget this year has implied service tax registration on all the members of a housing society and whose income is above Rs.10Lakh/year.
- It is important that each society has to re-calculate if it is under service tax purview or not.
- The budget states that almost all the income heads will come under service tax purview which includes the funds, utility charges and so on.
- There will be an exemption of Rs.5,000/month/member and a person owning multiple flats will have to exceed more than this amount.
- The service tax for housing societies is paid for the provisions of exempt services by the entity to third persons.
- The service tax is paid in an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use in a housing society or a residential complex.
- It is very important that the treasurer should be aware about the entire process wherein the treasurer will collect the tax from each member along with the bill. The tax then is paid to the government on a monthly basis and returns are filed in a quarterly or half-yearly basis. The tax rate this year was changed to 12.36%.
- The societies which collect more than Rs. 3000 per month for a flat/apartment are taxable and the due date would be before 01-July-2012.
- All apartment owners association registered societies which are providing services to their members based on the maintenance of the common areas, running and operation of the common utility services by sourcing the goods and services from third persons are liable to pay the service tax from 01-July-2012.
- The income heads which are taxable before 1-july-2012 are societies with followed guidelines from their respective auditor. They ranged from highly conservative to highly liberal ones.
- The income heads which are taxable from 01-July-2012 are the ones which levy charge to their members through ways of reimbursement of charges or share of contributions.
- The exemption is in respect of reimbursement charge or share of contribution with an amount of Rs. 5000/- pm per member.
- If there are commercial units in the building, the service tax is applicable to the commercial units but has no exemption applicable. The exemption will be applicable for residential units only.
- The power of attorney can be given to the agent in case the president/secretary is not filing the application.
- An acknowledgement is received after filing the application. The registration certificate will be received in 7 days.
- To perform the registration process, one can seek the help of a company secretary or the chartered accountant/agent.
The procedures for a service tax registration for housing societies are:
The member has to apply for the ST-1 and it should be filled. They can download the form by following the below link; http://www.servicetax.gov.in/forms/st1.pdf
- The authorized signatory of the Society/Association which is the president or the secretary has to sign the application.
- In order to complete the procedure, the following documents re required;
- Self-certified copy of the PAN of the Society/Association.
- A copy of Bye-Laws.
- A copy of resolution passed in GBM (reg. ST registration).
- A brief write-up of the services provided.
- A registration certificate of the Society/Association.
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