Central Government clarifies on GST on Flat maintenance charges

The Central Board of Indirect Taxes and Customs (CBIC) has clarified that GST is now payable on the entire amount if the maintenance charges collected through a Residential Welfare Association (RWA) go beyond Rs 7,500 every month per member.

Ministry of Finance has issued a Circular on GST on Maintenance Charges paid by Members to Resident Welfare Society

The Finance Ministry has stated that the Flat owners would pay 18% GST if their monthly maintenance fees towards resident welfare associations (RWA) are above Rs 7,500.

Residential Welfare associations are now required to collect GST on fees charged from members if such payment is above Rs 7,500 per flat per month and the annual turnover of RWA by means of supply of services and goods surpasses Rs 20 lakh.

The Finance Ministry in a circular explained an exemption from GST is available only if charges do not go beyond Rs 7,500 every month per RWA member.

The circular also stated that in case the charges go beyond Rs 7,500 every month per member, the entire amount is taxable. For instance, if the maintenance charges are Rs 9,000 every month per member, GST @18% would be payable on the entire amount of Rs9, 000.

On how the tax liability shall be calculated for an individual who owns two or more flats in the housing society or residential complex, the Ministry stated in such cases the ceiling of Rs 7500 every month per member would be applied separately for each residential apartment owned by him.

For instance, if an individual owns two residential apartments in a residential complex as well as pays Rs 15,000 per month as maintenance charges towards the maintenance of each apartment towards the RWA (Rs. 7500/- per month with regard to each residential apartment), the exemption from GST would be available to each apartment.

Before 25th January 2018, the exemption was available if the charges or share of contribution didn’t go beyond Rs 5,000 per month per member. The limit was increased towards Rs 7,500 every month per member with effect from 25th January 2018.

CBIC stated if the aggregate turnover of an RWA doesn’t exceed Rs 20 lakh in a financial year, it would not be required to register and pay GST even if the sum of maintenance charges go beyond Rs 7,500 every month per member.
CBIC also added that RWA would be required to pay GST on monthly subscription/ contribution charged from its members, in case if such subscription is above Rs 7500 every month per member and the annual aggregate turnover of RWA by means of supplying of services and goods is also Rs 20 lakhs or more.

The circular also stated an individual who owns two or more residential apartments in a housing society or a residential complex would normally be a member of the RWA for each residential apartment owned by him separately.
In such cases, the ceiling of Rs 7,500 every month per member would be applied separately for each residential apartment owned by him.

The Ministry furthermore explained that RWAs are entitled towards taking input tax credit (ITC) of Goods and Services Tax (GST) paid through them on capital goods (generators, water pumps, lawn furniture and so forth,), goods (taps, pipes, other sanitary or hardware fillings, and so forth.) as well as input services like repair and maintenance services.

As per the Circular: Registration Requirement for Housing Societies/RWA’s is:
 

Remarks - The condition of registration only arises when the aggregate turnover surpasses Rs 20 lakhs and monthly maintenance each member surpasses Rs 7,500/-

Author:

eStartIndia Team