Chapter 28

Service by an club/association/society to own members

 

Effective date:

(1st July, 2012)

Scope of Exempt Service –

Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution –

(a)  as a trade union;

(b)  for the provision of carrying out any activity which is exempt from the levy of service tax; or

(c)  up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex

 

Meanings and Definitions:

residential complex” means any complex comprising of a building or buildings, having more than one single residential unit,

single residential unit” means a self-contained residential unit which is designed for use, wholly or principally, for residential purposes for one family

trade union” has the meaning assigned to it in clause (h) of section 2 of the Trade Unions Act, 1926(16 of 1926).

goods” means every kind of movable property other than actionable claim and money; and includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;

 

(See Notification no. 25/2012 dated 20.06.2012, effective from 01.07.2012)

 

Clarification by the Board

(Taxation Guide – Guidance Note – 7 – Exemptions dated 20.06.2012)

7.11.8 What is the tax liability of a RWA on the charges collected from own members by way of reimbursement of charges or share of contribution for the common use of its members in a housing society or a residential complex.

Service of an unincorporated body or a non- profit entity registered under any law for the time being in force to its own members up to an amount of Rs. 5,000 per member per month by way of reimbursement of charges or share of contribution is exempt from service tax. Where RWA is working as a pure agent of its members for sourcing of goods or services from a third person, amount collected by RWA from its members may be excluded from the value of taxable service in terms of Rule 5(2) Of Service Tax (Determination of Value) Rules, 2006 subject to compliance with the specified conditions.

7.11.9 I am a Resident Welfare Association (RWA). The members contribute an amount to RWA for holding camps to provide health care services to poor men and women. Am I required to pay tax on contribution received from members?

No. You are not required to pay service tax on the contribution received as you are carrying out any activity (holding camps to provide health care services) which is exempt from the levy of service tax. If contribution is for carrying out an activity which is taxable, you are required to pay service tax.”