New Service Tax Amendment to Target Wealthy in India

Amendments in service tax protocols: Advantageous to smaller housing societies

By Dr Suvrokamal Dutta

Recent amendments in the service tax protocols will prove advantageous to smaller housing societies. It is worth mentioning in this regard that the Indian government has notified the levying of service tax on only those societies where maintenance charges paid by members exceed Rs 3,000 per month and the overall gross collection of the society is more than Rs 8 lakh per annum.

If experts are to be believed, this has ensured that middle and lower income group societies will be exempted from these taxes, and is definitely beneficial to most societies. However, societies with annual collections exceeding Rs 8 lakh will have to cough up service tax at 12.36 percent.

The pivotal factor here is that both the clauses of a member paying Rs 3,000 per month as maintenance charges and the society’s collection exceeding Rs 8 lakh per annum must be fulfilled for a society to fall in the bracket of service tax. “The society is not liable to file service tax returns if it collects more than Rs 8 lakh per annum, but individual members’ contribution is less than Rs 3000 per month. The new law is in effect from April 1, 2007,” pointed out Rahul Nandan of Bhagyalakshmi housing society.

In my opinion, laws are made for the welfare of the people and one must not doubt its intentions. This law is implemented so as to concentrate on a particular section of society. In terms of statistic, there are more than 23,000 registered housing societies in Mumbai and Thane. Of these over 90 percent of societies charge less than Rs 3,000 for maintenance purposes. This has ensured that more than 90 percent of the societies will be excluded and only very high premium residential projects will file returns.

There is no doubt that smaller societies will be definitely benefited from this amendment since their collection will be less than Rs 8 lakh. By saving this service tax they will be able to use this amount in a better way.

It has come into the notice of The India Street that not many are supporting the concept of including housing societies under taxable services. The argument stems from the fact that a cooperative society is a group of people who are providing services to themselves and not to any secondary party.

Not so long ago, the service tax department opined that payments like water tax and property tax should be exempted from service taxes, but at present, however, transfer fees, donations, property tax and all of which will be accounted for computing the tax are included under the service tax bracket.

High premium residential projects dotting the landscape of South Mumbai and reclamation areas where all amenities and comforts are given for the convenience of the selected flat purchasers in the city will be included in the taxable bracket.