Saturday, 25 November 2017

Now CHS can invest in Debt or Equity Mutual Fund

As amendment of the antiquated Indian Trust Act 1882 by Government of India.  Now CHS can invest in Debt or Equity Mutual Fund 

MCS ACT 1960  Sec. 70. Investment of funds.- A society shall invest or deposit its funds in one or more of the following:-
(a) in a Central Bank or the State Co-operative Bank;
(b) in any of the securities specified in section 20 of the Indian Trusts Act, 1882;
(c) in the shares, or security bonds, or debentures, issued by any other society with limited liability and having the same classification to which it belongs:

Provided that, no society shall invest more than such proportion of its paid up share capital as may be prescribed:

Provided further that, the provisions of this clause shall not apply to any investment made by any agricultural credit society in any processing society based on agricultural produce.

(d) in any co-operative bank (other than those referred to in clause (a) of this section) or banking company, approved for this purpose by the Registrar, and on such conditions as the Registrar may from time to time impose;
(e) in any other permitted by the rules, or by general or special order of the State Government.

Section - 20, Indian Trusts Act, 1882

Investment of trust-money.
20. Where the trust-property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee shall, subject to any direction contained in the instrument of trust, 2[make investments as expressly authorised by the instrument of trust or in any of the securities or class of securities] as specified by the Central Government, by notification in the Official Gazette :
Provided that where there is a person competent to contract and entitled in possession to receive the income of the trust-property for his life, or for any greater estate, no investment 3[***] shall be made without his consent in writing.
Explanation.—For the purposes of this section, the expression "securities" shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.]

Specified securities for investment by Trust u/s 20 of Indian Trust Act 1882

Section 20 of the Indian Trusts Act, 1882 deals with the Investment of trust-money. As per the said section, where the trust-property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrument of trust) to invest the money on the specified securities only.

The Finance Ministry by notification has specified the following securities for the purposes of the section 20 as above.

(Department of Economic Affairs) 

New Delhi, the 21st April, 2017

S.O. 1267(E).—In pursuance of section 20 of the Indian Trusts Act, 1882 (2 of 1882), the Central Government hereby specifies the following securities for the purposes of the said section, namely:—

(a) Government securities; 

(b) securities, the principal whereof and the interest whereon is fully and unconditionally guaranteed by the Central Government or any State Government; 

(c) units of debt mutual funds regulated by the Securities and Exchange Board of India established by section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(d) listed (or proposed to be listed on exchanges in case of fresh issue) debt securities issued by any body corporate, including a bank and a public financial institution as defined in clause (72) of Section 2 of the Companies Act, 2013 (18 of 2013), which have a minimum residual maturity period of three years from the date of investment; 

(e) Basel III Tier-I bonds issued by a scheduled commercial bank under guidelines issued by the Reserve Bank of India, which are either listed or are proposed to be listed on an exchange; 

(f) the infrastructure related debt instruments listed or proposed to be listed in case of fresh issue:—

(i) debt securities issued by a body corporate engaged mainly in the business of development or operation and maintenance of infrastructure, or development, construction or finance of low cost housing; 

(ii) securities issued by an infrastructure debt fund operating as a non-banking financial company and regulated by the Reserve Bank of India;

(iii) units issued by an infrastructure Debt Fund operating as a Mutual Fund and regulated by the Securities and Exchange Board of India;

(g) shares of body corporates listed on any recognised stock exchange which has a market capitalisation of not less than five thousand crore rupees as on the date of investment; 

(h) units of mutual funds regulated by the Securities and Exchange Board of India, which have minimum sixty-five per cent of their investment in shares of body corporates listed on a recognised stock exchanges;

(i) exchange traded funds or index funds regulated by the Securities and Exchange Board of India which replicate the portfolio of the Bombay Stock Exchange Sensex Index or the National Stock Exchange Nifty Index, or those constructed specifically for disinvestment of shareholding of the Government of India in a body corporate:

Provided that the investment under clauses (d), (e) and (f) shall be made only in such securities which have minimum AA rating or equivalent in the applicable rating scale from at least two credit rating agencies registered with the Securities and Exchange Board of India under the Securities and Exchange Board of India (Credit Rating Agency) Regulations, 1999:

Provided further that in case of investment under sub-clause (ii) of clause (f), the ratings shall relate to the non-banking financial company and for that sub-clause, the ratings shall relate to the investment in eligible securities rated above investment grade of the scheme of the fund:

Provided also that if the securities or entities have been rated by more than two rating agencies, the two lowest of all the ratings shall be considered
[F. No. 6/5/CM/2002-Vol.V] 

Monday, 5 June 2017

Guide - Residential repair rules

As per section 342 of BMC Act, 1988 (amended till date), the following “tenantable repairs”, can be carried out without obtaining permission from the ‘Building and Factory’ department of local BMC:
  • Plastering, painting, pointing of your flat
  • Providing guniting to the structural members or walls
  • Changing floor tiles
  • Repairing WC, bath or washing places
  • Repairing or replacing drainage pipes, taps, manholes and other fittings
  • Repairing or replacing sanitary, water plumbing or electrical fittings
  • Replacing the roof with the same material
  • Replacement of existing water-proofing material of the terrace.

The only pre-conditions to the renovation work to be done at residences are:
  • The original tenantable structure (whether rental or ownership) must be legal, i.e. it is based on the original BMC-approved Building plan.
  • Though no BMC permission for the above is required, it is advisable to do so under strict supervision of a registered Architect and/ or Structural Engineer
The “tenantable repairs” however shall NOT include the following:

  • Replacing or removal of any structure members of load bearing walls
  • Change in horizontal or vertical existing dimensions of the structure
  • Lowering of plinth, foundations or floors
  • Addition or extension of mezzanine floor or loft
  • Flattening of roof or repairing roof with different material
  • No merger of tenancies by removal or opening of any walls in between two or more tenancies.
  • Changing location of bathroom/ WC/ kitchen sink, in a way that can cause leakage to residents below.
  • Increasing the internal height of the structure

BMC notices
Notice issued by BMC under section 354 is a STOP Work Notice, if it feels ongoing work is unlawful. If there is unauthorised construction, then BMC can issue a Show-Cause Notice under section 351. This is NOT a Stop Work notice – it is issued when work is completed and persons are utilizing the said premises. If the officer is not satisified with the documents produced, then he has to give them an opportunity to revert the property back to the original legal status, after which BMC can inititiate demolition under section 488. The party can go to the civil court for a stay. Notice under section 381 is issued by BMC if there is nuisance to other members due to some work done by the resident.
For any construction to be legalized, there must be documentary proof (electric bill or property assessment etc.), that the structure existed prior to 1962.
Before starting renovation work on your property, if you are in doubt, it may be safe to take ‘dated’ pictures of the property. However, if you submit a letter to the local BMC office, attaching a copy of the Architect’s proposed plan, you may be requested to forward the same to Building Proposal department at Byculla, for written approval.
For debris lying on the footpaths or roadside or even inside your building compound, you may be liable to be fined. Since agents are always on the lookout to harrass citizens, collect the debris in the house and try to remove it on a Sunday. Debris has to be removed immediately by a contractor, who is authorized by the BMC to dump the debris in an approved BMC plot.
Under section 375A of BMC Act, Commissioner can give notice to owner of premises for removal of debris from their premises.
Safety Grills
Newer buildings come with the permission to install grills. For the older buildings, grills can be “legalized” by writing to the BMC (Building & Factory department) and attaching the following documents:
  • Landlord NOC or Society NOC under section 47 and 65 of model bye-laws
  • Original floor plan of the property (flat)
  • Approximately Rs 2,000 fee (exact amount depends on the area of window covered)

Lofts are governed by section 5 of Table 19 of the DC Rules, 1991 AND Mezzanine floor by Section 6  of Table 19 of the DC Rules, 1991.

Common passages
Structures built outside the flat, are not allowed (as per DC rules 1991 – Section 44(4)(f). Also corridor or exit or passage must be kept free of obstructions as per section 43(2)(f) for fire safety. Its minimum width is as specified under Table 20 of the DC rules.
For Tenanted properties too, as per section 33 of MRCA (Maharashtra Rent Control Act), the right to possession of a flat also includes the right to enter and exit the property without any obstruction (in the passage and beyond too).
Other relevant rules under co-operative housing society Model Bye-laws:
  • Section 139 and 7(d), the managing committe has the right to collect a deposit for renovation, because there may be damage to the society premises during renovation and society has the right to recover that amount from the member (even if the damage occurs inside the member’s house – for eg to the structure).
  • Section 50 under New Model Bye-laws says that no member must cause nuisance or inconvenience to other members during their renovation work. And committee has powers to stop such a nuisance u/s 50(b)
  • Section 168 takes into consideration the convenience of members, allowing usage of lifts to be regulated by the managing committee.
  • Member has to make an application for usage of terrace u/s 65(a)(ix) of  new model bye-laws. The committee can decide u/s 171 whether to grant permission or not, for temporary usage – and can also take a payment for the same.

The above is meant to be used as a guide, not as a replacement for legal opinion. For more information, please feel free to contact the local BMC office.

Thursday, 25 May 2017



GST Insight and applicability of GST on Coop HSG Societies-

Why Maharashtra Housing Society is covered under GST

GST is applicable to the dealer-person who is rendering the service or supplying the goods in its regular course of business activity.

Person has been defined under 2(84) as follow:-

“person” includes— (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (e) a Limited Liability Partnership; (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013; (h) anybody corporate incorporated by or under the laws of a country outside India; (i) a co-operative society registered under any law relating to co-operative societies; j) a local authority; (k) Central Government or a State Government; (l) society as defined under the Societies Registration Act, 1860; (m) trust; and (n) every artificial juridical person, not falling within any of the above.

 From this it can be noted that under clause (i) a co-operative housing society will be covered.

 Can the activities of housing Societies be considered as “Business Activity”?

The term business has been defined under Section 2(17) as follow:- “business” includes–– (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) services provided by a race club by way of totalisator or a license to book maker in such club ; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;

The above clause (e) specifically covered a Society, thus the housing society will be considered as carrying out activities in furtherance of business and will be liable for Registration under GST.


The “reverse charges” has been define u/s 2(98) as “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act.

Thus, under the following cases the Recipient must pay the required GST

1) Any transaction notified by the Government, as on date nothing has been notified but likely it may be for a) Transport payment b) Lawyer Professional Fees c) Security Payment d) Payment where people are providing labour, etc.

2) Obtaining goods / services from UNREGISTERED DEALER.

 The recipient will have to prepare an Invoice in such circumstances and pay the tax to government and prepare Payment Voucher

ALL persons liable to pay tax under Reverse Charges will have to be registered themselves under the act irrespective of their liabilities on basis of Turnover. In all probabilities, most of even small societies may be coming for registration under this provision of section 24(iii) and (iv)  

 Summary of above Act and Few Queries-

 1) Whether the Maharashtra Housing Society will be covered under GST ?
Answer is YES

2) Whether any exemption is available on basis of turnover?
a) If the Society’s aggregate receipt of turnover is less than ₹ 20,00,000 it will not be liable for Registration and tax collection.
b) If the Society’s aggregate receipt of turnover is more than ₹ 20,00,000 but less than ₹    50,00,000 and does not desired to claim any tax credit on its expenses paid GST it can go for Composition Scheme under Section 10.
c) If the Society’s aggregate receipt of turnover is more than ₹ 50,00,000 it will be fully covered like any other business entity.

3) Will the Billing format of the Society will have to be changed ?
 Yes, the format will have to be changed and it will be changed as format to be notified.

 4) Will the method of accounting have to be changed?
Yes, now as the tax paid on the expense side is available under specific scenario, the party-wise details have to be uploaded and the work being done with various type of online / offline programs will undergo a major change to provide for recording detailed expenses in lieu of recording transactions as being done presently, whereby few society are paying collecting and paying taxes inefficiently increasing the cascading effects.

5) Will the Input tax Credit be available on all the expenses incurred by the Society ?
On following expenses where the taxes are paid No Input tax Credit will be available, i.e.
a) Electricity Expenses
b) Stamp Duty
c) Property Tax

6) Will the reverse charge mechanism applicable to the Society?
On certain transaction, it’s expected that reverse charge mechanism will be applicable and accordingly the GST will have to be paid first and then the Credit may be claimed. Details provided in Annexure “D”.

Under GST, all dealers including a Society will have to file 3 returns in a month for each and every transaction on the billing side on 10th of following month and on expenses side on 15th of following month and consolidated return on 20th of following month and an Annual Return has to be filled. Thus in all 37 returns will have to be filled.

Other than these, if they deduct TDS then they will have to also filed GSTR-7 by 10th of the following month.

However, certain societies may fall under quarterly return if they have opted for Composition Scheme by forfeiting all the Credit on expenses and willing to pay tax on receipts. Composition Scheme is not dealt with over here as it requires a separate approach.

7) Will a Separate Audit be required under GST?
Yes, if the turnover exceeds prescribed limit. Thus, in effect there may be minimum 3 audit as follow:
a) Statutory Audit
b) GST Audit
c) Income Tax Audit

8) On what amount GST must be paid?
GST is payable on consideration, which has been defined under section 2(31) of the CGST and state law have been requested to follow and align their laws in line with CGST. Thus, it is assumed at this moment that it will be the same. Consideration includes not only amount receivable for an activity but also monetary consideration for agreeing to refrain from an activity.

However, it’s provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply . That means on deposit there will be no GST, unless supply and / or service is made against that deposit.