There is a mess which is managed by students. Till now there was each and everything was illegal and now they want to make such illegal thing into legal so I consult them to form a co-operative society.... because they do not want to pay any tax, is it ok with co-operative society or there should be trust or company u/s 25 ? The net turnover is more than 3crore They first collect all money from students and such money is spend on them only i.e. there is no profit in short there is mutuality concept. My further question is whether service tax is applicable or VAT is applicable or none ??? If yes, is there any way to escape from these taxes ?? Employees are more than 60. Which other acts/taxes are applicable here ??
03 August 2011
I would suggest to consult practicing CA this is not the right forum as lots of intricacies are there. relying on the suggestion from CCI if you miss some compliance you will be the sufferer.
Sec 25 co is created for promotion of some specific activities or streme. if you creat Cooperative society then each student who takes meal will have to be the member of CoopSo as the COOPSo is created for members benefits. since your activities are commercial it can not be called as charitble or society. I do not understand if your T/o is over 3 crore then why dont you float a company or a p/ship firm.
19 July 2024
Forming a cooperative society can be a viable option for managing the mess in a legal and tax-efficient manner, given the mutual nature of the operations. Here’s a breakdown of the considerations based on the information provided:
### Cooperative Society vs. Trust or Section 8 Company:
1. **Cooperative Society**: - A cooperative society is suitable when the operations are based on the principle of mutuality, where members pool their resources for their common benefit (in this case, managing the mess). - It allows for democratic management and distribution of benefits among members. - Cooperative societies are regulated by state-specific Cooperative Societies Acts, and in your case, it would likely fall under the Cooperative Societies Act applicable in your state.
2. **Trust or Section 8 Company**: - Trusts or Section 8 Companies (companies registered under Section 8 of the Companies Act, 2013) are typically used for charitable or nonprofit purposes. - They may involve different regulatory requirements and tax implications compared to cooperative societies.
### Tax Considerations:
1. **Service Tax (GST now)**: - Previously, service tax applied to services provided by educational institutions, including mess facilities. With GST in place, the taxability would depend on the turnover and registration threshold limits. - GST may apply if the annual turnover of the mess exceeds the threshold limits set by GST laws (currently Rs. 20 lakhs for most states).
2. **VAT (now subsumed under GST)**: - VAT (Value Added Tax) was applicable to goods sold by the mess, but it is now subsumed under GST.
3. **Income Tax**: - Cooperative societies are generally exempt from income tax on surplus or profits derived from activities carried out with members.
4. **Employee-related Taxes**: - Payroll taxes such as Employee Provident Fund (EPF), Employee State Insurance (ESI), Professional Tax (if applicable in your state), and other labor laws would apply since you mentioned more than 60 employees.
### Steps Forward:
1. **Formation of Cooperative Society**: - Consult a legal expert to assist in forming a cooperative society under the relevant state Cooperative Societies Act. - Ensure compliance with registration, by-laws drafting, and other statutory requirements.
2. **Tax Compliance**: - Register for GST if turnover exceeds the threshold limit. - Understand and comply with GST regulations regarding input tax credits, invoicing, and filing of returns. - Ensure compliance with employee-related taxes and labor laws.
3. **Mutuality Concept**: - Emphasize the mutual nature of operations where the mess serves its members (students), which supports the non-profit motive typically associated with cooperative societies.
4. **Seek Professional Advice**: - Given the complexities involved, especially with GST implementation, it’s advisable to consult with a tax consultant or chartered accountant well-versed in cooperative society taxation and compliance.
By following these steps and ensuring compliance with applicable laws and taxes, you can transform the mess into a legally recognized and tax-efficient entity under the cooperative society structure.
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