As cities grow denser and cooperative housing societies take on greater responsibilities—whether it is maintaining infrastructure, managing finances, or exploring sustainability initiatives like solar power—members are increasingly required to stay informed about their rights and duties. Disputes over payments, elections and eligibility are common; but many issues can be resolved through a clear understanding of the Society bye-laws and cooperative housing society (CHS/the Society) regulations.
 
This week’s column addresses some common yet critical concerns: Can interest be charged on delayed payments for Society initiatives? Is GST (goods and services tax) applicable on arrears? Can a non-resident member contest the managing committee elections in a CHS? Read on to know more.
 
Additional Contributions Sought for Solar Panel Installation in Society 
 
Question: Our CHS is asking for a refundable deposit of Rs25,000 for solar installation work. One member has been unable to pay due to financial difficulties. Can the Society charge interest for the delay in payment? If yes, at what rate? What happens if the member is unable to pay the Rs25,000 at all?
 
Answer: If the Society is collecting Rs25,000 from members for solar electricity installation, it must be done only after the proposal is passed at a special general body meeting (SGM). The SGM must be attended by at least 75% of the members and the resolution must be approved by at least 51% of those present. For example, if your Society has 100 members, then a minimum of 75 members must attend the SGM. Out of these, at least 51 must vote in favour of collecting Rs25,000 from each member.
 
If the proposal has been properly passed and a member fails to pay the amount, the Society can charge simple interest at 21%pa (per annum) on the overdue amount.
 
If the member does not pay at all, the Society can classify them as a defaulter and take appropriate action as per the bye-laws.
 
Interest and GST Applicable on Delayed Payments Made to Society
 
Question: My CHS charged 18% interest on delayed maintenance payments, along with 18% GST on four years of arrears which I have now paid in full. Can I request the Society for a refund of the interest, or at least ask them to reduce the interest from 18% to something lower, like 4%, which is the savings bank interest the Society earns on its deposits? In my view, that 4% represents the actual loss to the Society, while the 18% interest rate is arbitrary and excessive. I understand that 18% is the maximum permitted by law, but it is not compulsory to charge that much to defaulters.
 
Answer: For delays in paying society dues, the law permits the Society to charge up to 21% simple interest. Your Society is charging 18%, which is within the legal limit and less than the maximum allowed.
 
However, GST is normally not applicable to delayed payments of Society dues. You should request that the Society not charge GST either on the dues or on delayed payments. If your payment has been incorrectly shown as pending, submit a copy of the Society’s receipts and your bank statements and ask the Society to correct the records for your flat.
 
Also note, if your CHS comes under the purview of GST, as per Section 15(2)(d) of GST Act, the Society can charge 18% GST on late payments and penalty charges levied on members. As per the Act, GST is applicable for a CHS where every member pays more than Rs7,500 per month as maintenance charges and its annual turnover is above Rs20 lakh.
 
Eligibility of a Non-resident Member for Society Elections
 
Question: Is there any restriction on a cooperative housing society member contesting the managing committee (MC) election if he resides outside the premises?

Answer: The purpose of a CHS managing committee is to have members who are readily available to attend meetings and manage affairs. If a person residing outside contests and gets elected, but fails to attend three consecutive MC meetings, he will automatically cease to be a member of the managing committee. In such a case, a new member can be elected in his place.
 
NOTE
We will not be answering queries posted in the comments. Only questions sent through the Moneylife Foundation's Legal Helpline will be answered. If you want to seek guidance or ask questions to Mr Shanbhag, kindly send it through Moneylife Foundation's Free Legal Helpline. Here is the link: https://www.moneylife.in/lrc.html#ask-question
 
Disclaimer: The guidance provided in these columns and on our Legal Helpline is on the sole basis of the facts provided by the reader/questioner and does not amount to formal legal advice in any form whatsoever. 
 
(Shirish Shanbhag has an MSc in Organic Chemistry, a Diploma in Higher Education, and a Diploma in French and has completed his LL.B. in first class in 2021. Before his retirement, he was a junior college teacher at Patkar College from July 1980 to May 2012, teaching theoretical and practical chemistry. Post-retirement in 2012, he started providing guidance and counselling to people on several issues, specifically focusing on cooperative housing society-related matters. He has over 30 years of hands-on experience in all matters about housing societies and can provide out-of-box solutions for any practical issue.)