09 August 2012
Whether an Apartment Owners Residents Association collecting services charges, interest on late payment or corpus fund, sinking fund etc. is liable for Service Tax on the amount collected from its members.
09 August 2012
1. As per the Service Tax Law, w.e.f. 01.07.2012 all the services provided by a person to any person are liable to service tax unless the services is specified in the Negative List or is exempted. The notification Number 25/2012-ST dated 20.06.2012 exempts 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 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;
A careful analysis of the clause (c) above brings home the following :-
1. to be eligible for exemption a. the entity has to be either an unincorporated body (which can be a profit making or non-profit making organisation) or it should be a non-profit entity registered under any law; b. The collection of amount on account of reimbursements or contribution should not exceed Rs. 5,000/- per month per member of the housing society or a residential complex; 2. The service provided to the members is sourcing of goods e.g. diesel, water, cleaning material, hard-wares, electrical goods, machiery etc. or services e.g. security, house-keeping, etc. for common use of the members. Such service is to provided by way of reimbursement of charges or share of contribution. 3. The collection of Sinking fund or Corpus fund is a collection of contribution from the members for sourcing of Capital goods or service like painting or laying roads etc. and therefore has to be taken into account while determining whether the amount collected is more than Rs. 5000/- per month per member or not.
Therefore, the collection of any amount from the members by what ever name or description is liable to Service-tax if the such collection exceeds Rs. 5,000/- per month per member and the collection is for the sourcing of goods or service even if on a future date.
Secondly, the amount charged by the association on account of renting the the shops or halls for marriage/parties/seminars to it members or a third party is chargeable to service tax.
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