As the name suggests, service tax is a certain tax imposed by the government on services provided.
In a society, if residents avail of the services provided by the Management Committee, service taxes come into the picture.
We hope to clear some of your basic service tax related doubts with this article.
Let’s draw different situations and understand how much service tax the Management Committee is obligated to pay in each case.
Case 1: If a resident pays more than Rs.5000 towards Management Committee provided services, service tax will be calculated on the whole amount and not just on the amount exceeding Rs.5000.
Case 2: If a resident pays up to Rs.5000 towards Management Committee provided services, no service tax is applicable.
Case 3: If in a financial year, the aggregate value of taxable services offered by the Management Committee does not exceed Rs.10 lakhs, no service tax is applicable. In case the aggregate value of services exceeds Rs.10 Lakhs, the Management Committee is liable to pay service tax only on the amount exceeding Rs.10 Lakhs.
Case 4: When a Management Committee merely acts as a ‘pure agent’, i.e. collects money from residents for various services used such as electricity, water (without adding any extra charge) and transfers the same to the respective authorities concerned, the service falls under the ‘non-taxable services’ category.
However, service tax is applicable on electricity utilized in society common areas.
Note: Management Committees are allowed a set off if they avail of CENVAT credit.
To take a look at the circular published by the Ministry of Finance in January 2014, click here bit.ly/V8IFac
If you still have concerns related to service taxes applicable to housing societies, please write to us at support@commonfloor.com
