Every Sector looks through fine prints of budgets every year to find if there was anything favourable coming up next fiscal? Cooperative is not an exception. Many of us heard for the first time a turning point around the word cooperative namely a “Cooperative Federalism”.
Not that it is new but sharp focus was received by this word after the PM Modi started chanting the same at the highest level in India; this has been backed up like no Government did by accepting the recommendation of Finance Commission for increase in tax devolution of whooping 10 per cent basis point from 32% to 42% and that is an increase exceeding 30% .
The States are having exclusive jurisdiction to monitor Cooperative Movement and it is for cooperative sector in each State to claim a lion’s share of this funds for its speedy development. The Centre should insist or rather tag in fine prints these devolution to States honouring in spirit and letter the Constitutional mandates per a recent historical enactment of the Parliament namely the Constitution ( 97th Amendment ) Act 2011.
For Congress ruled States it is obligatory as this amendment was passed during their tenure and for BJP rule States it is far more obligatory as the hefty devolution is the gift of their own party Government.
The overall thrust of the Budget being infrastructure development and implementation rather than planning on paper should help all sectors reap gains of economic activities in which cooperative sector having presence across India can hope to set and achieve attain much higher growth targets.
One negative move for Depositors in Cooperative banks; Depositors with cooperative banks, who are also members, will be burdened with additional paperwork beginning June as they will have to request the bank to not deduct taxes at source. So far they have been spared TDS.
The other move that will add to maintenance costs of posh housing societies having higher maintenance bills (exceeding Rupees 5000 excluding Taxes) as the Service tax rate has been proposed to be increased from 12% to 14%.
Litigation in Kolkata and Delhi High Courts confirmed that where every member was a share-holder and every share-holder was a member, there was no provision of service from one entity to another and therefore the application of service tax does not arise. However, this stand has not been accepted by the service tax department. The Government however issued a Circular No.175 /01 /2014 – ST [F. No.354/237/2013-TRU Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise& Customs, Tax Research Unit, North Block, New Delhi,10th January, 2014 clarified as under:
“Under the negative list approach, with effect from 1st July, 2012, notification No.25/2012-ST [sl.no.28 (c)] provides for exemption to service by a RWA to its own members by way of reimbursement of charges or share of contribution up to five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members.”
At present, several housing societies are collecting and paying service tax. Associations, clubs and chambers of commerce are also collecting tax on membership subscriptions.
THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNALWEST ZONAL BENCH, MUMBAI Appeal No. ST/105/2009-Mum, ST/185/2011-Mum, ST/298-299/2011-Mum has (Decision: 18.12.2014) accepted the principle of mutuality – the society provided services to itself which could not be subject to service tax. However, finality will be reached only once the Supreme Court adjudges on a similar matter pending before it”
This is a highly confusing area and is an avoidable irritant to cooperatives undoubtedly.