From the above discussion, it is clear beyond doubt that the service, in relation to maintenance or repair, when provided to a customer by any person, it is a taxable service. Services provided by a co-operative society to its members are certainly in relation to maintenance or management of immovable property which has been brought into service tax net with effect from 16.06.2005 under the category of maintenance or repair.
However, the co-operative society is rendering these services to its members, whereas services when provided to customer by any person are taxable. Can the members of the society be treated as customers of such society? In the opinion of the author the answer is “No”. Co-operative societies work on the concept of mutuality and provide services only to its members. Primary purpose to run the co-operative society is to provide facilities to its members only and to make profit by providing services to the outside customers. There is a concept of mutuality between society and its members and any excess/shortage of receipt over its expenditure is divided or borne by members. Hence, in the opinion of author the services rendered by the co-operative society to its members in relation to maintenance or repair of immovable property cannot be subject to service tax under the category of Maintenance or Repair services. In this connection author would like to refer to the judgment in the case of Saturday Club Ltd. Vs Asstt. Commissioner, Service Tax Cell Calcutta [2005] 1 STJ 1013 (Cal) wherein mandap keeper services rendered by club to its members were held to be non-taxable on the concept of mutuality.
Therefore, Group Housing Co-operative Societies which have completed the construction and allotted the flats to their members have been collecting monthly maintenance charges from their resident members are not liable to pay service tax in-spite of the fact that societies are providing taxable services to its members. It is because of the reason that member is not customer of co-operative society and services rendered to customer only are taxable under this category of service.
Some of the Group Housing Societies have been providing some paid services like watchmen, Electricians, Plumbers etc. to its members. These services are in relation to maintenance and management of immovable property, hence the same principle will be applicable and group housing societies will not be liable to pay service tax under this category of service.
Some of the group housing societies provide facility of payment of bills on behalf of members to Delhi Jal Board, electricity supplying companies, telephone operators etc. These services are not directly in relation to maintenance or management of immovable property, hence not governed by the above said principles. For the sake of argument let us agree that these services are not directly related to immovable property, than these services are likely to fall under the category of “Business Auxiliary Services” under the sub-clause provision of services on behalf of client. Services are taxable under the category of BAS when such services are rendered by commercial concern. Group housing society cannot be termed as commercial concern as services are rendered to its members and not to earn profit and excess/short of receipt over expenditure is divided/ borne by the members on the concept of mutuality. Therefore, group housing societies are not liable to pay service tax on these kinds of services.
To conclude services rendered by Group Housing Societies to its members are not subject to service tax under the provisions of service tax. However, the way new services are being brought into the tax net, scope of existing services is being enlarged and the way taxable clause of new services is being drafted, the day is not far when these services will also become taxable. Till such time we can rejoice the non-leviability of service tax on Co-operative Group Housing Societies for the services provided to its members which falls under the category of “Maintenance or Repair Services.
” The author is a member of the Institute. The views expressed herein are his personal views and do no necessarily represent the views of the Regional Council |
