Category Maintenance Charges

10 things to consider before evaluating balance sheet

If you are a Secretary, President, or the Treasurer of a gated community, terms like maintenance dues, late payment charges, reconciliation of the balance sheet are a part of your everyday job.

For a society to run smoothly, maintenance dues have to be paid on time, the accounting has to be precise, and the treasurer must have clear insights on the society’s income and expenses.

However, not every treasurer or secretary comes from an accounting background and for this very reason, ApnaComplex offers a robust, fully automated accounting and billing solution with 100+ financial reports and 30+ audit-ready reports.

When the time comes to reconcile or evaluate a balance sheet, the Treasurer must consider various aspects and pay attention to a handful of factors before evaluating the balance sheet and submitting for audit.

Keep reading to learn about these essential factors and why they can never be overlooked!

Fixed Asset Verification

A Treasurer must ensure that whatever fixed assets physically available in the society’s premises,  must reflect on the balance sheet as well. This will help the treasurer keep note of the available assets, depreciated value, etc.

Outstanding receivable confirmation

All outstanding amounts, including maintenance charges, vendor payments, service charge dues, etc are received and updated on the balance sheet. Failing to add even a negligible amount can cause confusion and discrepancies which will cause trouble to the Management Committee during the time of auditing.

Bank Reconciliation

The treasurer must ensure that the bank balance reflecting on the account and bank statement/balance sheet are the same. If it doesn’t match, the treasurer must spend eons of time figuring why the statement and balance doesn’t match and must fix it before auditing.

Thankfully, with ApnaComplex, a treasurer doesn’t have to worry about this, for the solution auto-reconciles the balance sheet. It also gives the comprehensive details of overdue, advance payments, late payment charges, etc, saving a treasurer’s time by more than 80%.

Vendor Payments

Vendor payments, including any loans or advance payments made to or received from vendors, have to be cross checked and recorded along with the date and vendor details. The treasurer must also keep a copy for all the invoices and receipts for future references.

The ApnaComplex system, enables the treasurer to auto-generate receipts and invoices, and maintain digital repository of the same.

Vendor Payable Reconciliation

Payments made to vendors must be recorded and reflected on the bank account and bank statement.

Corpus Fund and Sinking Fund

The Treasurer must confirm that the Corpus Fund (capital amount, or the money provided by the builder to RWA during the formation of RWA), and the Sinking Fund (emergency money) are untouched. They should also ensure that the money in the bank and the amount reflected on the balance sheet/statement are the same.                        

Fixed deposit and interest

The Treasurer must confirm the money fixed deposit and the interest it generates. It should match the bank statement.

Year ending provision

Any provision such as security services, electricity charges, equipment maintenance services that happened before March has to be incorporated in the provision and reflected on the balance sheet.

Refundable Deposit and Advances

The Treasurer must also confirm the Refundable deposits (if any) and advance payments.

Statutory Payment payable and Compliances

The Treasurer must make sure that the TDS payments, GST payments, ITR payments, etc are done and all the relevant forms are filled and submitted.

We hope you find these quite useful! ApnaComplex’s accounting solution is the only fully-mature solution made for and by gated communities available today. It is GST compliant and fully automated. If you would love to simplify your society’s accounting processes and save your time and energy, visit apnacomplex.com


Know all about non-occupancy charges

Before purchasing a house in a gated community, it is important to know about certain bylaws, charges, rules, and regulations. These are inevitable and failing to pay these charges or not abiding by these rules can cost you dearly.

If you are reading this blog, then surely you must have an idea about maintenance charges (add link). Like maintenance charges, societies also levy non-occupancy charges on flat-owners if their flat is unoccupied and vacant for a while.

In this article, we’ll explore more about non-occupancy charges, the criterias, and what the law says about them.

Criteria for non-occupancy charges

If a flat-owner and his family live in the unit, or if the unit is rented out, the flat-owner does not have to pay non-occupancy charges since the RWA (Resident Welfare Association) will receive the monthly maintenance amount from that unit.

Likewise, the flat is exempted from non-occupancy charges if the said flat is occupied by the flat owner’s immediate family members, given that they bear the maintenance charges.  

Calculation of non-occupancy charges

In 2001, the Maharastra government issued a circular under Section 79A of the Maharashtra Cooperative Societies Act, 1960, capping the non-occupancy charges at 10% of the society’s maintenance charges.

For example, if monthly maintenance charges are ₹4000, the non-occupancy cannot be more than ₹400 a month. Service charges include maintenance charges, common area electricity, lift and security excluding municipal taxes.

The need for pegging the non-occupancy charges rate

Before the circular from the Maharashtra government came into effect, societies charged exorbitant rates as non-occupancy charges. This drained the non-occupying flat owners financially, negatively impacting rentals, and particularly affected the NRIs (non-residential Indians) who actively invest in the Indian real estate.

Additionally, several cases came to light where the non-occupancy charges were disproportionate. They were so high that societies were collecting lakhs per annum as non-occupancy charges.  

Bhartiya Friends Cooperative Housing Society and Mont Blanc Cooperative Housing Society were classic cases of this.

In the first society, that is Bhartiya Friends, among 49 flats, owners of two flats had paid ₹2,50,000 per annum as non-occupancy charges. However, it was found that a major portion of the amount had been used for paying the property tax of the other 47 houses.

Similarly, the Bombay High Court observed that out of the 51 flats in the Mont Blanc Cooperative Housing Society, only a maximum of six houses were rented or vacant at any given time. However, a whopping ₹3,00,000 to ₹24,00,00 per annum were collected as non-occupancy charges. On the contrary, the property tax of the building was only ₹16,00,000 per annum, showing a stark difference between the money collected and spent.

From these two cases, it is clear that non-occupancy charges had become a tormenting tool instead of being a marginal and negligible mount. It was also evident that the excess amount collected was misused to pay the dues of other members who were defaulting.

Consequences of levying high non-occupancy charges

Charging an additional amount under pretence apart from the fixed 10% is illegal. If a society is caught overcharging, under the Consumer Protect Act, the RWA members can be prosecuted for negligence, inadequate service, harassment, and abuse of power by overcharging. The flat owner must submit relevant proofs and documents while taking legal action.

When a flat-owner fails to pay non-occupancy charges

If a flat-owner continuously fails to pay the non-occupancy charges, the committee can send them reminder notices and declare them a defaulter. Additionally, the committee can deny providing the no-dues certificate when the owner is looking to rent or sell the property.    

Flat-owners must know their rights and committee members should discharge their duties with honesty and integrity. The Indian Cooperative Society Acts were framed and brought into effect keeping in mind the welfare of all the residents. A person looking to buy a resale property should also check if the previous owner has any arrears, know the society rules and charges, and laws pertaining to housing societies.

Since its inception, ApnaComplex has been bringing a slew of changes in India’s gated societies. Through its peerless technology and community automation, it has streamline societies’ everyday operations and has saved ample time and money for the management committees. The ApnaComplex app is being religiously used by more than 600K societies in 6000 societies across 80 Indian cities. 

To know how we can help you streamline your society too, visit apnacomplex.com  


Know all about society maintenance charges and how they can impact buyers

Maintenance is a big part of housing societies. To maintain the building, the common facilities, and to pay the society staff (security, janitors), every resident is charged a maintenance amount.

Before moving into a gated community, owners and tenants must know all about the society’s maintenance structure and how their contribution will be used.

In this article, we explain all about maintenance charges, how a unit is charged, how the collected money is used, how they can impact you financially, etc.

Charging maintenance

The management/RWA (Residents’ Welfare Association) has the right to collect maintenance charges from the owner or tenant. The maintenance amount is charged per square foot, or a uniform amount is levied on all the residents – whichever is agreed by the majority of the residents.

When a building is constructed, the builder takes the onus of maintaining the building until the building is substantially occupied for an RWA to form. The builder might request initial buyers to pay the maintenance amount of a year upfront during the purchase or in installments. This is perfectly legal as long as the builder uses the money only for the welfare of the building and has a valid audited record.

How should the builder handle the maintenance money collected?

There are certain guidelines involved here and the builders must abide by them. These guidelines and how a builder should discharge his/her duties when it comes to maintenance charges are discussed below.

Maintenance charges belong the society

The maintenance charges collected from the buyers belong to the society only and builders cannot use them for their gains. Here, the builder only takes care of the building for a limited period and the responsibility of managing and maintaining the building and its premises, in the long run this falls under the responsibility of the RWA once it is formed and fully functional.   

An exclusive bank account

The builder/developer is required to create a bank account for depositing maintenance contributions exclusively. Once the RWA is formed, the builder should hand over the accumulated maintenance amount or the balance amount to the RWA along with the income, expenditure, and bank account details.

When the builder hands over the maintenance to RWA, it is mandatory that an auditor or CA (chartered accountant) endorse that the maintenance money has been used for the welfare of the building only.

Similarly, the lump sum maintenance amount deposited in the bank account will accrue interests. This interest amount solely belongs to the maintenance account only and cannot be used by the builder.

What is included in the maintenance charges?

–          Common electricity and water charges

–          Insurance charges

–          Property and non-agriculture taxes

–          Sinking or reserve fund

–          Car-parking charges

–          Society election fund

–          Service charges

–          Training and education fund

–          Non-occupancy charges

–          Expenses arising due to repairs and general maintenance of the building, including lift and other facilities maintenance and services.

–          Salaries of society staff including security personnel, janitors, maintenance staff and their travelling allowances, etc.

What are the criteria for maintenance charges?

There are six types of maintenance charges with each having a different criterion and the residents are charged accordingly.

Sinking Fund – 0.25% of each unit’s construction cost (per annum).

 Repairs and maintenance expenses of building – 0.75% of each unit’s construction cost (per annum).

Repairs and maintenance expenses of lifts – Divided among residents equally.

Service charges (security, assets, common area electricity, etc) – Divided among residents equally

Parking charges – According to parking slots given to each unit.

Water charges and property tax – Depending on the consumption of each unit.

Maintenance charges and GST

For the first couple of years post the construction of the building, maintenance charges will be unclear since the unit will only begin to occupy and the application of maintenance charges will be work in progress. The homeowners will set a standard and decide the maintenance charges that work for them both in the short and long term.

However, in July 2019, the Finance Ministry ordered that flat owners must pay 18% GST if their monthly maintenance contribution is more than ₹7500 and RWA’s annual turnover of supply of goods and services is more than ₹20 lakhs.

Maintenance charges and RERA

According to the RERA – Real Estate ACT (Regulation and Development) of 2016, the developer is responsible for the maintenance of the building and providing essential services to the residents until it is taken over by the RWA.

RERA also clearly states that home buyers who have agreed to the sale of a unit are responsible for making the required maintenance payments towards the association and contribute towards common electricity and water charges, municipal tax, ground rent, registration charges, etc. The owners are required to make the payment on the agreed date, time, and place as outlined in the agreement  

Financial implications of maintenance charges

A society’s maintenance charges are decided based on the building’s life cycle cost and can influence the buyers’ decision. When the building construction is underway, developers might not bring up the maintenance nor discuss it in detail.

Nevertheless, when the property is ready-to-move-in, the developer will quote a maintenance amount considering all the expenses taxes, and other deposits. At this stage, the buyers have to pay one or two years of maintenance amount upfront.

For example, if the monthly maintenance is ₹4000, they will have to pay ₹48,000 (4000 x 12 months) or ₹96,000 (4000 x 24 months) initially and this will have an impact on their purchasing decision.

Waiving off maintenance charges

Though payment of maintenance charges are a mandate, they can be reduced or waived off for a stipulated time due to unexpected circumstances. The classic example would be the COVID-19.

Several societies in India had reduced the maintenance fee or have waived it off for a few months when the pandemic was raging and people had to take salary cuts or lost their jobs,

To conclude, buying a property is a decision that involves a substantial amount of money. Before signing the agreement, buyers must consider and analyse all the expenses including the maintenance amount they will be paying during their tenure. This amount that will be paid every month can amount to a significant amount in the long run if saved.

Want to simplify and streamline your society’s daily operations and make maintenance dues collection and payment an easy affair? Visit apnacomplex.com and schedule a free demo!


Discover the secret to reducing your society’s maintenance fee!

Levying a monthly maintenance fee is vital for running a gated community smoothly. However, exorbitant charges can be a bummer to the residents and likely to cause discord among the Management and residents.

In this article, we will explore the ways using which you can reduce the expenses of your society which will directly contribute to a reduced maintenance fee and increase the savings of the treasury.

Bid adieu to overstaffing

Through the means of community automation and smarter technology, now effortlessly reduce the number of staff you deploy. In a study, it was discovered that an app like ApnaComplex is instrumental in both streamlining the operations and cost reductions.  

In an apartment complex, earlier 9 security guards were working on three rotational shifts 8 hours each and two supervisors were managing them. This security team costs the society INR 1.71 lakhs each month.

However, once the ApnaComplex app was deployed, the management was able to monitor the security guards’ routine and patrol better. QR codes were pasted around the building and the patrolling guards were asked to scan the QR code often throughout their guard duty to ensure that they were up and vigilant.

It was concluded that ApnaComplex reduced the total guards from nine to six who worked in two 12-hour shifts and only one supervisor was needed instead of two thanks to the superior monitoring tool available.

The Management had to pay only INR 1.08 lakhs every month to the new security team which means, a net saving of INR 63,000 was possible each month! It was also observed that ApnaComplex improved the quality and efficiency of the guards.

It is worth noting that the above study is only the tip of the iceberg. Through ApnaComplex’s various other modules, the extent of cost-saving can be much more. 

For instance, ApnaComplex’s Accounting module comes with auto reconciliation of balance sheets which eliminates the need for an external auditor. This directly contributes to cost-saving. Likewise, online transactions and digitally storing data remove the need for manual cheque collection and storage.  

Say hello to efficient staff management

In another case study conducted by ApnaComplex, it was noted that efficient and smarter staff management can do wonders to your society’s treasury.

In another society, four electricians were working two shifts of 12 hours each and their total cost came up to INR 48,000 per month. When the ApnaComplex app was installed in the society, not only did the complaints raised by residents via ApnaComplex reach the electricians immediately, the app also allowed the electricians’ manager to raise a job card and monitor how quickly the problems are resolved.

With the help of ApnaComplex and better planning, the electricians were able to tend to multiple households on the same day with improved efficiency. Likewise, better monitoring and planning reduced the number of electricians from four to three and it cost the management INR 36,000.

Smart and sleek operations offered by ApnaComplex enabled the society to save INR 12,000 every month.

Adopt smarter Inventory Management

Along with the study on electricians’ efficiency, inventory management was also observed. When the inventories and their availability were updated on the ApnaComplex app, it was noted that the storage of light bulbs, socket covers, tube lights, etc were substantially improved which also led to a faster turnaround time.

To boot, inventory and complaint data available on the ApnaComplex app also helped the management identify recurring errors and malfunctioning assets. Using ApnaComplex they were able to find the root cause of the problem and fix it at the origin. This enabled the management to reduce wastage and asset replacement.

Through smarter management and better inventory replenishment, the said society was able to save INR 8,000 every month, the study noted.

Apart from helping you save money, an app like ApnaComplex can also help you increase your society’s revenue. Our modules are tailor-made for gated communities are app is the only mature solution available today. To know how else we can benefit your society, visit our website


GST for Apartment Associations and Housing Societies – Clarifications

In a recent circular, the Department of Revenue has brought more clarity into the GST Calculation of Resident Welfare Associations(RWA). We have put together a comprehensive guide on how this may impact your Society and how ApnaComplex can help your Society adhere to GST regulations effortlessly.

Q: Is our RWA required to collect GST on Monthly maintenance collected from our members?

A: Your RWA is required to pay GST only if both of these conditions are met:

  • Aggregate Turnover of your RWA > Rs.20 lakh per year
  • Maintenance charged per member per month > Rs. 7500

Your RWA is exempt from GST even if one of these conditions is not met.

To auto-calculate GST for your RWA, just spend a few minutes and update the tax structure for your Society in ApnaComplex. ApnaComplex automatically generates GST Computation Report which exactly specifies how much GST your Society has to pay for a particular time period.

 

Q: Can our RWA take an input tax credit of GST for payment of Capital goods and Services towards our vendors?

A: Yes, RWA can claim an input tax credit of GST paid on capital goods (generators, water pumps, lawn furniture, etc.), goods (taps, pipes, other sanitary/hardware fillings, etc.) and input services such as repair and maintenance services.

In the ApnaComplex expenditure module, while entering the bills, you can capture the GST levied by the vendors. ApnaComplex’s GSTR 3B report automatically shows the GST inflow credits on payment made towards your vendors for Goods and Services. This report will exactly indicate how much GST credits can be claimed by your RWA.

 

Q: If a member owns two or more flats in the housing society or residential complex, will the ceiling of Rs. 7500/- per month per member on the maintenance be applied per residential apartment or per person?

A: As per the general business sense, a person who owns two or more residential apartments in a housing society or a residential complex shall normally be a member of the RWA for each residential apartment owned by him separately. The ceiling of Rs. 7500/- per month per member shall be applied separately for each residential apartment owned by him. For example, if a person owns two residential apartments in a residential complex and pays Rs. 15000/- per month as maintenance charges towards the maintenance of each apartment to the RWA (Rs. 6000/- per month for one apartment and Rs. 9000/- for the other apartment), the exemption from GST shall be applicable on the apartment whose maintenance is Rs. 6000/-.

ApnaComplex’s 100% automated invoicing lets you set up recurring against all or select flats based on formulae or fixed value or both. Our intuitive interface lets you configure maintenance charge calculation methodology yourself without the need to get in touch with our Support. Visit ApnaComplex Portal > Income > Member Income > Recurring Invoice to set up a recurring invoice to your members.

 

Q: How should the RWA calculate GST payable where the maintenance charges exceed Rs. 7500/- per month per member? Is the GST payable only on the amount exceeding Rs. 7500/- or on the entire amount of maintenance charges? 

A: In case the charges exceed Rs. 7500/- per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs. 9000/- per month per member, GST @18% shall be payable on the entire amount of Rs. 9000/- and not on [Rs. 9000 – Rs. 7500] = Rs. 1500/-.

ApnaComplex enables you to easily define the GST calculation methodology in accordance with the above rule. Just select ‘No’ for “Apply Tax on the excess amount” field in your GST tax structure on ApnaComplex

 For your reference: GST-circular-No-cgst-109

If you need any assistance in harnessing the full capabilities of ApnaComplex’s accounting module, schedule a demo here. We would be happy to help.


Pitfalls of Cash Transactions in an Apartment Complex

Maintenance collection is a task that recurs every month. Committee members need to ensure that each unit in the apartment complex pays what is due and is done so in a timely manner. This is a long undertaking in itself. However, in many cases, these transactions are made in cash. While this is convenient in many cases and helps clear any immediate payments that need to be made, cash transactions come with a few pitfalls that are not easy to ignore.

Inefficiency
The time of maintenance payment sees a lot of activity within an apartment complex. Often, the committee members have to knock on individual doors to collect the dues. In other cases, the residents flock to the committee office to make the payments. Payments also need to be eventually collected and recorded from the defaulters. This takes up a lot of time from the committee member’s schedule.

Safety concerns
One of the main concerns with cash transactions is safety. When there are multiple units within an apartment complex, the amount of cash that is exchanged is a considerable sum. This opens up the possibility of misplacing or miscounting the amount. It also makes it open to theft. Further, the cash collected needs to be physically deposited in a bank. Driving around the streets with a large amount of cash can even put you at risk.

Inaccuracy
With an influx of cash payments, it falls on the committee members to ensure that the amount is recorded and reconciled. In an absence of an automated system, it has to be done manually. This leaves room for human error. The issue further extends even to cheque payments. In case of a bounced cheque, bookkeeping becomes long and tedious and prone to errors.

With tools like ApnaComplex, maintenance collections can be made almost effortless. It also sends out reminders for payments and draws out a defaulters list. ApnaComplex also offers a one of a kind and convenient Collection Gateway where members can do a NEFT/IMPS transfer of their maintenance dues to a unique “Account Number” issued by ApnaComplex. With Collection Gateway, ledgers are updated automatically with details of the amount transferred by the member and payment receipts are issued automatically. This eliminates the need for cash transactions and manual effort by the treasurer or accounts office. Going cashless has never been easier!


ApnaComplex and the end of door-to-door collections!

At the end of a working week, all everybody wants to do is relax and spend some time with family. However, every month there is one event that can get in the way of doing that: maintenance collection. A few years back, the vicious cycle of payment dues billing, reminders and door-to-door maintenance collections kept most of the apartment management associations on their toes. Add the issues of defaulters and manual bookkeeping, and the weekends could easily get as busy as the rest of the week.

Thanks to technology, the days when apartment management associations were reaching out to residents on a one-to-one basis to collect maintenance are long gone. Management associations now use sophisticated apartment management software, like ApnaComplex, to simplify their maintenance collection process to an extent of a single mouse click!

How has ApnaComplex helped the management associations in timely collections?

1. A timely reminder for payments:
Instead of sending reminders to each and every resident one by one,  the apartment management software empowers the management association to now send automatic reminders to all residents at one go via email/SMS. Residents don’t mean to default on maintenance payments, it’s their hectic schedules and absence of a timely reminder mechanism that makes them miss out on submitting the maintenance charges on time. A reminder system reduces the default rate up to a great extent.


2. Ease of paying maintenance charges:
The
ApnaComplex App comes with a collection gateway that automates monthly maintenance payments. This eases the residents from the whole ordeal of coming to the society office just to drop a cheque or pay in cash.

3. Saves Reconciliation Efforts:
Manually recording the amount received from the residents and reconciling all the payments can be quite a long process. With the advent of powerful tools like
ApnaComplex, the entire reconciliation is taken care by the App.  

4. Filter the list of defaulters:
The apartment management software enables the management association to filter the list of defaulters. The entire process gets automated and a list of residents whose maintenance payments are due can be easily drawn out along with the penalty to be charged from them. Emails/SMS to be sent out to defaulters is also automated through the software reducing the manual work up to a great extent.

One of the misconceptions was that apartment management solutions are very costly. In many cases, this misconception was cleared, when a lot of apartments started using ApnaComplex, a cost-effective subscription-based leading apartment management software with zero hardware costs and an ongoing support. The cost of the software is directly proportional to the number of units an apartment has, making it more economical than ever for the apartment management associations.


Collection Gateway – Smart way of paying Housing Society Dues

Collection Gateway is a unique solution offered by ApnaComplex to make a Housing Society collections 100% Cashless.  Collection Gateway was launched in later part of 2015 and is now used by thousands of apartments every month to pay  their maintenance and other dues to the society.

Customers using Collection Gateway have immensely benefited from

(a) Automated Receipt issuance for IMPS/NEFT payments made by members

(b) Lower convenience charges (and almost negligible) compared to Payment Gateway

(c) Zero Suspense Entries in the Society’s Bank Account

Societies adopting Collection Gateway shall see the benefits instantly. The efforts put in by treasurer drops by close to 90%. For societies using an accountant to manage book – Collection Gateway saves significant efforts as the following activities are eliminated:

(a) Responding to member’s queries on the payment they have made but receipt was not yet issued

(b) Checking Bank statement every other day to issue receipts

(c) Sending Notices to Owners/Residents on Suspense Deposit Entries in the Society’s Bank Account

(d) Easy/Automated publishing of Defaulters Report as the report is always accurate without any manual intervention

(e) Automated Email/SMS/Push Reminders to Follow up on Defaulters

In short Collection Gateway helps in reducing your society maintenance efforts and thus the Society Maintenance Charges.

Best of all, Collection Gateway works with your existing Bank Account of the society and existing Bank Accounts of the Members. There is NO NEED to open a new Bank account – either by Society or by Members.

Please refer to our Collection Gateway page for more details.

Reach out to us to adopt Collection Gateway and save both Costs and Efforts.


GST on Co-operative Housing Societies Maintenance Dues / Common Area Expenses

Impact of GST on Co-operative Housing Societies Maintenance Dues / Corpus Fund / Common Area Expenses

Co-operative Housing Societies are merely a collecting and pass through mechanism like in case of property tax, water charges, common area repairs and maintenance etc. It can be contended that no activity is carried out by a society for its members. There may be various service providers providing service to the society which is the legal owner of the building including that of common areas, for e.g. repairs service providers, maintenance service providers, security agencies etc. Thus, the society is receiver of service and not provider of service. If a member’s flat or office premises require repairs, the same is obtained directly by the member and the society is not involved in provision of that service. Further no consideration is flowing from the members to the society except allocation and collection of expense. Any such payments without quid-pro-quo of a service cannot be liable to tax. Thus, it can be argued that even under the new dispensation, service tax is not applicable in case of a co-operative society when any activity is carried out for no consideration and the same would be continued under the GST Act.

Service tax on co-operative societies is a contentious issue. In a co-operative housing society, the land and building belongs to the society and the members by virtue of their membership of the society have right to occupy, enjoy and transfer their flats, subject to the prevailing rules and regulations and bye-laws of the society which are required to be approved by the specified authorities under the law. A co-operative housing society is a collective mechanism wherein it make payments of property tax and like payment to the municipal corporation and other Government bodies, incur some expense for common good and allocate and collect the expense in form of certain charges from the members on some basis or as per the resolutions passed in the General Body Meetings. Such collections are generally in the form of reimbursements. Some of the functions of a co-operative housing society are statutory functions like transfer of shares of the members with the underlined interest in the property (flats). It works on mutuality principles as the function of the society is for the members and by the members. Though it is not the objective, it is possible that at the end of a particular period, the society may generate some surplus which is used for members in future. In case of deficit, the same is made good by contributions from its members. However, such surplus or deficit cannot be said to be consideration for providing any service.

It is clear that a co-operative housing society collects the expenditure incurred either for some specific purpose like municipal taxes, water charges etc. on the basis of area of flats or some other appropriate basis. Such recoveries are in the nature of reimbursements. There is no element of service in case of “reimbursement of expense” and thus the charge (S. 66) fails as per the judgement of Hon’ble Delhi High Court in one of the case. If viewed in this context, service tax or GST on Co-operative Housing Societies cannot be applied on mere allocation / collection / reimbursement of expenditure. Some of the expenditures classified as follows are taxable under the current tax regime:

  1. Property Tax:

Collection of property tax is statutory levy by a municipal corporation or a local authority under the Constitution of India. A society is a mere collecting agent and pays the same to the authority. There is no element of service in it. Even assuming it as a service, it is not provided for a consideration. Hence service tax is not leviable. As an abundant caution, the society should ensure that the amount collected from the members does not exceed the actual amount. Same taxability would be continued under the GST Act.

  1. Maintenance and Repair Charges:

‘Maintenance’ as the name suggest is the amount collectively reimbursed to the society to upkeep and maintain the building and premises on regular basis. The members of the society pay maintenance charges on some predetermined basis as decided in the General Body Meeting. Electricity charges for common areas, watchman or security charges and other miscellaneous expenses incurred by the society including accounting, audit etc. is part of maintenance charges. Service tax may be applicable on this. If the actual service provider in relation to any input service, charges service tax in his bill, the society would be eligible to take CENVAT credit of the same and the same taxability would be continued under the GST Act.

  1. Parking Charges:

Car parking is in relation to regulate the parking place between the members and providing of space by use of vacant land belonging to the society for a consideration. There is an element of service in it and thus service tax may be leviable and the same taxability would be continued under the GST Act.

  1. Water Charges:

Water is “goods” under the Sales of Goods Act, 1935. However, the society is not selling the water to its members. It is just providing the pipeline to deliver water in the members’ premises. So long as it is collecting actual amounts as charged by the municipal corporation, there may not be any consideration. Therefore, charges recovered from members on actual basis are not liable to service tax. In the event of collection of water charges exceeding the payments, only such extra amount can be chargeable to service tax. In relation to water for common use like swimming pool, garden, club house etc., it is advisable to have separate meter and separate collection from the members. Such charges for use of water for common purpose may be liable to service tax and the same taxability would be continued under the GST Act.

  1. Charges for use of Club House, Swimming Pool, etc.:

These are specific services by the society to the member opting for such facilities. Any consideration paid for this would be liable to service tax and the same taxability would be continued under the GST Act.

  1. Share Transfer Fees and Donations:

Share transfer fees are the amount charged by the society for transfer of shares when a member approaches for its consent for transfer of his flat. It falls within the definition of service as a consideration for an activity carried out for the member for transfer of his lat. There is an element of service in it and service tax may be leviable on the same and the same taxability would be continued under the GST Act.

  1. Sinking Fund:

It is a fund which is collected by the members of the society to set aside money over a time of period to meet the eventuality of reconstruction of the building. It is obligatory for a housing society to collect Sinking Fund under the Maharashtra Co-operative Societies Act, 1960 and rules made thereunder. The fund collected from a member is transferred to new member if the original member ceases to be a member. No definite service or contractual obligation is involved so far as collection of sinking fund is concerned. It’s a mere collection from the members of the society.

  1. Repair Fund/Painting Fund:

Like sinking fund, this is also a mere collection to meet eventuality of major repair expenditure in future. There is no promise to provide a definite service with any identified time frame. No expense is also identified. It is also not sure that a member from whom the repair fund is collected would be a receiver of service at the time when it is actually provided. The agreement to provide service to the member is absent. However, as an abundant caution, the society should bring out this candidly in the resolution pertaining to collection of repair fund to avoid any ambiguity.

  1. Non Occupancy Charges

Non occupancy charges are charges levied by a housing society only when a flat or unit is let out by its members. A unit in a co-operative Housing Society is for occupation and enjoyment of its members. The permission of the society is necessary when the unit is let out. The society may accord its permission in accordance with the provision of its bye-laws and on payment of some periodical charge. Such charge is a consideration for agreeing to let out its premises and may be liable to service tax. Thus any consideration for allowing a member to let out his premises may be liable to service tax under the relevant clause of the Finance Act, 1994 and the same taxability would be continued under the GST Act.

In terms of above discussion, all the charges upon which service tax is leviable if it exceeds the limit of Rs. 5,000 p.m. per member in a housing society. If a person owns two flats, for all practical purpose it would be considered as two members. The exemption would be accordingly computed and then the remaining would be liable to service tax and the same taxability would be continued under the GST Act.

Rate of Tax and Exemption Benefit under GST

As per existing Tax structure currently service tax is charged @ 15% & whereas as per proposed GST tax @ 18% will be charged on Supply of Services but in existing tax structure assesses is not able to take the input tax credit benefit of goods & services whereas in proposed GST system assesses will be able to take credit of supply of both goods & services which will cover difference of additional 3% GST on Co-operative Housing Societies up to a level.

However, the exact rates applicable to particular goods and services have not been yet finalized for GST on Co-operative Housing Societies.

Update on 31st May 2017:

Following exemptions are provided under the GST Regime for Housing societies (Source : Schedule of GST Rates for Services)

  • In case of a housing society or residential complex, the exemption is limited to 5,000 p.m. per member for sourcing of goods or services from a third person for the common use of its members.
  • Total Maintenance Recovery from members of the Society is less than 20 Lakhs per Annum.

RWA / Housing societies will need to charge 18% GST to its members if maintenance recovery is more than Rs.5,000/- per month per member AND if total maintenance recovery by the society exceeds Rs. 20 lakhs per annum. Accordingly, societies who fulfill either of the conditions will need to register under GST and charge 18% on their collections from Members from July 1st on wards. Please note that the Rs. 5,000/- per member per month exemption was available in the Service Tax regime as well and is being continued under GST regime.

Update on 13th July 2017:

Govt. has issued a press note on GST applicability on RWAs. You can read the press release here – http://pib.nic.in/newsite/PrintRelease.aspx?relid=167386

GST needs to be levied only if monthly maintenance per member crosses Rs. 5,000/- and annual collection is more than 20 Lakhs. This blog post is updated accordingly.

ApnaComplex strongly recommends Housing Societies to talk to their respective auditors and get professional advice to understand the actual impact for your Society and if you need to register for GST. 


**Visit GST Section on ApnaComplex Help site to see answers to various frequently asked questions on GST**


Disclaimer: This information is offered as a public service. While we try to make it accurate as possible as on the date of publication, the laws change and more importantly the way we interpret laws could also change. We cannot promise that this information is always up-to-date and correct. We strongly recommend you to consult appropriate professional advisers to understand the actual impact for your society. We are not responsible for any actions or non-actions that are done by you based on the information present in this article or any other article on this blog.


new year resolution

5 Ways To Decide On A New Year Resolution That Doesn’t Need Work

It’s that time of the year when almost everyone around you is coming up with ways of making the incoming year more productive. Some people have been planning their new year resolutions since the latter half of the year. Piling on one promise after another with a failed attempt at each is not the way to go, is it? Well, ApnaComplex is happy to lend a helping hand. Here are 5 easy new year resolutions in case you haven’t got on to the ‘change is good’ wagon yet. Trust us, these are more helpful than you’d know.

 

  • Save water –

With all the global warming signs getting bigger and bigger, doing your bit for the planet will only make you feel good about the next year. Tracking water usage levels and avoiding water wastage is one option. ApnaComplex provides you with Water Monitor, a water tracking app that allows you to track the volume of water being used by your society. A plus point is that it tracks the billing as per water usage too. Find out more about Water Monitor here.

new year resolution

 

  • Avoid preventable theft –

This one leans towards those who have faced theft issues in the past. Why offer a chance when there doesn’t have to be one? One aspect of this problem is vehicle theft. ApnaComplex’s solution to that is Vehicle Sentry, a vehicle tracking system that lets you stay aware of your vehicle’s whereabouts. Know more about Vehicle Sentry here.

new year resolution

 

  • Family safety –

For all those who believe that safety in any form can never be enough, ApnaComplex has Gatekeeper, a visitor tracking app. Gatekeeper lets you know about your visitor beforehand and lets you verify their entry. Be aware of who knocks on your door. Stay alert with Gatekeeper here.

new year resolution

 

  • Spend less –

Everyone can cash in on this new year resolution. Spending less is never an idea that is unwelcome. One way of going about with this is by holding less change in your pockets and using cashless services. Collection Gateway by ApnaComplex is another such service that lets you pay maintenance dues via NEFT or RTGS. Here’s why Collection Gateway should be your new year resolution this year.

new year resolution

 

  • Make lives easier –

Why not have an easy management system in place for those who work hard at settling the books in your society? Get some good karma under your belt by getting ApnaComplex for your society. Keep track of reminders, bill and maintenance payments and vendors of your society in a more automated manner. This is one of the most easiest ways of fulfilling a new year resolution, don’t you think?

new year resolution

 

So, this time, let’s all make a promise to ourselves to move forward with the new year resolutions we choose. Good luck chasing the new life!