Service Tax on Society/ Mutual Concern

[Pushkar Gupta]

Dear Sir

It has been registered a Society under Society Registration Act 1860 for mutual benefit of members. It has been contributing a member ship fee in two way one is life membership fee of ₹ 111000 one time and other is general member ship fee ₹ 9000 per month. Member fee is utilized for meeting running expense of society.

Society is formed for mutual benefit of member for acquiring land from contribution of members and build the flat for members from among contribution.

My issue is that is service tax is chargeable on membership fee collected from members. However when service provider and service receiver is same, it is “self service” and whether service tax is chargeable on self service. Service tax is applicable if there is service.

Other issue is that Contributing money in land contribution by members whether it is liable for service tax and no legal documents such as agreement to sales is executed.

Thanks

Pushkar Gupta

[KASTURI SETHI]

Sh.Gupta Ji,

How can you call it 'self service' ? Are the members of the Society constructing themselves ? Answer is big NO. It is not club membership fee. Actually Contractor is providing construction service (Pure Labour or with material, whatever the case may be ) to the Society and contractor is being paid for that by the Society. So three elements are present in this activity. These are (i) Service Provider (ii) Service Receiver (iii) Consideration.

On what basis you are talking of self-service or exemption. This activity is now covered under the category of 'Other Than Negative List'. Earlier it was covered under BAS. (Job-worker). Contractor is a job-worker and Society is Jobbee. It appears to me a case of pure labour which cannot be classified under Works Contract Service. Under Section 68(1) of the Finance Act, Contractor will have to deposit ST after collecting from the Service Receiver unless and until specifically exempted by virtue of any Notification or Rule etc.

[Ganeshan Kalyani]

In my view, fees collected from member by the Society is exigible to service tax.

AI Summary

Service tax on membership fees: society-held contributions used to procure construction services are taxable as consideration for services. Receipts from membership contributions used to procure construction are taxable because a contractor provides construction services to the society for consideration, creating the three elements of a taxable service; the contractor must collect and deposit the service tax from the society unless a specific exemption applies.