Service Tax for Housing Societies – Clarity

The Budget of July-2012 has given considerable clarity about Service Tax for Housing Societies. Right after the Budget we had presented the interpretations in this article. The article included inputs from Society Auditors, Service Tax consultants in the Big Fours, and almost every CA who is a Treasurer on our Network! While the article tickled the brains of Users who love legalese, our “just tell me what to do” treasurers were not too happy. Now that 6 months have passed, many of you have wanted to know what Societies are actually doing wrt Service Tax.

Below is how Service Tax is being collected by Societies using ADDA.

1. Service Tax has to be collected in addition to the Regular Maintenance charges, if the total Amount Collected exceeds Rs.5,000/month/flat.

2. The Income Heads that are considered for Service Tax: All Income Heads, other than Taxes collected on behalf of any Government Body. Income Heads like Water Charges, Common Area Electricity charges, Corpus Fund, Sinking Fund etc. are also under Service Tax purview. This was not the case before July-2012.Please see detailed comparison before July-2012, and after.

3. The Service Tax is to be charge on the Amount EXCEEDING Rs.5000. So if a Flat’s Monthly Bill to Society is Rs.5200, Service Tax @ 12.36%  is to be charged on Rs.200.

All the above are already configured in your ADDA for automatic calculation.

All you need to do is turn on the flag “Service Tax Applicable”, the Automatic Billing will show the correct Service Tax on relevant Bills only.

By any chance, are you wondering that Service Tax in case of your Society ( or Association) is different because it is not in Mumbai and does not have to follow those strict Mumbai CHS compliances? Stop wondering, because Service Tax is a Central Government tax and applies uniformly across all States. Also, if you are still stuck in the interpretation of “Exemption per Member” or “Exemption per Flat”, we are with you.  There is no clarification from Service Tax Department yet, and everyone’s taking the most fair, simple and logical interpretation.

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About the Author: San Banerjee

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