Note on applicability of GST on maintenance charges under the provisions of GST law

Central Board of Indirect Taxes and Customs (CBIC) has clarified on applicability of GST on Maintenance Charges levied by Resident Welfare Associations vide Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 and Notf No 2/2018 – Central Tax (Rate) dated 25.01.2018:

A. Notifications on GST Applicability on Maintenance charges paid in Apartments/RWA’s

Below mentioned is the summary detailing the essence of important notifications issued by CBIC in this matter:

Sl. No. Notification No. & Date Coverage of the notification Essence of the Notification
1 Notification No.12/2017 -Central Tax (Rate) dated 28.06.2017 Exemption from GST on maintenance charges from members Notification No.12/2017 -Central Tax (Rate) dated 28.06.2017 at sr.no.77 provides for the following exemption to housing societies:

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 –

(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

2 Notification No. 2/2018-Central Tax (Rate) Dated: 25th January, 2018 Increase of ceiling from Rs 5,000 per month to Rs 7,500 per month Later on the exemption ceiling was enhanced from Rs 5,000 per month per member to Rs 7,500

B. Who is a Member for the purpose of the applicability of GST on maintenance charges?

The Notifications do not define a Member but as per our interpretation the definition of member, shall be governed by the respective Act and Rules which govern the said Resident Welfare Association (RWA) and bye laws formed by the association.

Member for the purpose of this shall mean the member of the Resident Welfare Association (RWA). It may be interpreted that the member may be the person whose name is entered in the register of Member as per provisions of the Co-operative Society Act and Rules applicable to the respective society. Same shall be governed by the Bye-laws of the individual Resident Welfare Association (RWA)

Definition of Member as per Karnataka Co-operative Societies Act, 1959 –

Section 2(f) of the Act – ‘member’ means a person joining in the application for the registration of a co-operative society and a person admitted to membership after such registration in accordance with this Act, the rules and the bye-laws and includes a nominal and an associate member;

C. FAQ on GST applicability on maintenance charges levied by resident Welfare Associations from its members –

1. When is GST applicable from maintenance charges collected from members by Resident Welfare Associations?

Ans: A society may be registered under GST, however if the monthly contribution received from members is less than Rs.5, 000/- (and the amount is for the purpose of sourcing of goods and services from a third person for the common use of its members), (it has been enhanced to Rs 7,500 w.e.f. 25th January 2018) no GST is to be charged by the housing society on the monthly bill raised by the society. However, GST would be applicable if the monthly contribution exceeds Rs.5, 000/-.

2. Whether GST is applicable on Statutory dues such as property tax, electricity charges which forms part of monthly maintenance bill raised by the society?

Ans: Certain statutory dues such as property tax, electricity charges etc. form part of the monthly maintenance bill raised by the society on its members. The question would arise whether such charges should be included while computing the monthly limit of Rs.5000/ or Rs 7,500 (w.e.f. 25th Jan 2018). As per clause (b) of the above exemption, exemption is available to housing societies for provision of carrying out any activity which is exempt from the levy of Goods and Services Tax assuming that a housing society is a non-profit registered entity; and property tax and electricity is exempt from the levy of GST.

Thus, charges, collected by the society on account of property tax, electricity charges and other statutory levies would be excluded while calculating the limit of Rs.5,000/- or Rs 7,500 (w.e.f. 25th Jan 2018).

3. My maintenance charges is Rs 10,000 per month. Whether I should pay GST on Rs. 10,000/- or Rs.2,500/-?

Ans: Further, the question would then arise that if the monthly bill is say Rs. 10,000/- (and the same is on account of services for common use of its members), will GST be applicable on Rs. 10,000/- or Rs.2,500/-. In such cases, exemption is available up to an amount of Rs.7,500/ and GST would be applicable on the amount in excess of Rs.7,500/-

4. Applicability of GST on charges collected with maintenance

Please explain Applicability of GST on following charges which is collected along with maintenance –

1. Property Tax-actual as per Municipal Corporation of Bangalore

2. Water Tax- Municipal Corporation of Bangalore

3. Non- Agricultural Tax- Bangalore State Government

4. Electricity charges

5. Sinking Fund- mandatory under the Bye-laws of the Co-operative Societies

6. Repairs & maintenance fund

7.Car parking Charges

8. Non Occupancy Charges

9. Simple interest for late payment.

Answer

1. Services provided by the Central Government, State Government, Union territory or local authority to a person other than business entity, is exempted from GST. So, Property Tax, Water Tax, if collected by the RWA/ Co-operative Society on behalf of the Municipal Corporation from individual flat owners, then GST is not leviable.

2. Similarly, GST is not leviable on Non-Agricultural Tax, Electricity Charges etc, which are collected under other statutes from individual flat owners. However, if these charges are collected by the Society for generation of electricity by Society’s generator or to provide drinking water facility or any other service, then such charges collected by the society are liable to GST

3. Sinking fund, repairs & maintenance fund, car parking charges, Non-occupancy charges or simple interest for late payment, attract GST, as these charges are collected by the RWA/ Co-operative Society for supply of services meant for its members

S.No List of facility/Charges Applicability of GST
1 Property Tax-actual as per Municipal Corporation of Bangalore Not Applicable
2 Water Tax- Municipal Corporation of Bangalore Not Applicable
3 Non- Agricultural Tax- Bangalore State Government Not Applicable
4 Electricity charges Refer to Note 2
5 Sinking Fund- mandatory under the Bye-laws of the Co-operative Societies GST is Applicable
6 Repairs & maintenance fund GST is Applicable
7 Car parking Charges GST is Applicable
8 Non Occupancy Charges GST is Applicable
9 Simple interest for late payment. GST is Applicable

5. Whether activities of housing societies would become more expensive due to introduction of GST?

Ans: RWA shall be required to pay GST on monthly subscription/ contribution charged from its members if such subscription is more than Rs. 5000 or Rs 7,500 (w.e.f. 25th Jan 2018) per member and the annual turnover of RWA by way of supplying of services and goods is also Rs. 20 lakhs or more.

Under GST, the tax burden on RWAs will be lower for the reason that they would now be entitled to Input tax Credit in respect of taxes paid by them on capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes, other sanitary/ hardware fillings etc.) and input services such as repair and maintenance services. ITC of Central Excise and VAT paid on goods and capital goods was not available in the pre-GST period and these were a cost to the RWA.

Hence, the RWA should pass on the benefit of ITC available on capital Goods, Inputs and Input Services to the residents in monthly maintenance amount.

Thus, there is no change made to services provided by the Housing Society (RWA) to its members in the GST era.

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20 Comments

  1. VINOD NAKRA says:

    As per GST Act the salary of emploees does not attract GST. Should this amount not be deducted from the monthly taxable amount to compute whether it exceeds Rs 7500//PM as maintenance charge?

  2. VINOD NAKRA says:

    In our Society many services are outsourced and Invoice raised by them includes GST @ 18%. Thus Monthly maintenance already includes 18% GST. Thus the amount (including 18% GST of vendors) exceeds Rs 7500/- PM. If another 18% is added then will it not be GST over GST?
    Should Taxable amount Not exclude GST and ONLY if amount of monthly mainteanance is over 7500/-PM then 18% can be charged?

  3. Akhil Kashyap says:

    Can a builder collect gst on maintenance charges from member of society when he registered on GST Portal as a proprietorship firm.

    1. fcsrohit says:

      Hi Akhil, Exemption is granted to RWA and not individual builder. If the builder is registered in GST as a proprietor, he is eligible to collect GST

  4. Ashok kr pandey says:

    Is gst applicable on RWA sinking fund . As it is not a part of basic maintenance charge for maintaining a property also not permanent in nature.

  5. Keshav Gupta says:

    Exemption limit Rs.7500 applicable to shop/office unit holder members in case of mix kind of society, as applicable to flat owners.
    Please clearity.

  6. Shiraz says:

    If Builder is doing Maintanance and charges GST on maintanance.
    Whome should ITC (input tax credit) belong to?

    Please share ref from some source. As we are being double taxed and no one in in appartment is aware about it

    Thanks

    1. fcsrohit says:

      Hi Shiraj,

      The GST ITC shall be available to Builder if the supplier invoice has GSTIN of Builder mentioned on it. Passing of ITC is discretion of the Builder, however, he should pass on benefit of ITC to the owners/tenants

  7. B C Kharabanda says:

    I have a property in joint name of my wife and myself. I operate from that property my sole proprietorship firm which has regular GSTIN. RWA raises maintenance bills in our joint name as per property title. Can I claim GST input credit for GST included in such bills for maintenance charges?

  8. Suresh Chandra Padhi says:

    Kindly let me know if the Maintenance Charge with 18% GST paid can qualify for a tax rebate while calculating tax on a Renal Income.

  9. Anil pawar says:

    common area Maintenance -3437.50
    common area Maintenance GST -618.75
    Comman service area – 600,00
    Comman service area GST 108.00

    can you please let me know these GST charges is ok?

  10. Charandeep Sahni says:

    Our society maintenance is rs 10000 per month, we raise quarterly bill, how to calculate GST on quarterly bills, will it be calculated on 22500 ? Kindly suggest

        1. Rohit Kumar says:

          Dear Sir,

          If the petty expenses is paid to unregistered person then GST is not applicable.

          If Cleaning charges is paid to registered supplier then GST shall be charged by the supplier, otherwise GST is not payable

          Regards

          Rohit

  11. Suresh Kumar Khurana says:

    Thanks a lot for very informative article . In our society the reimbursement of electricity supplied by DHBVN ( utility company ) is taken from residents by splitting the DHBVN bill in two parts
    – actual apartment as per KWHR meter reading
    – common areas electricity for balance KWHR divided by number of apartments
    The sum total of the electricity bills of all the apartments equals the monthly bill received by the society from DHBVN.
    No GST is levied on these electricity bills . Please advise that we are following the laws .

  12. CHANDRA RAVI says:

    Can An Association charge GST even if the Maintenance amount is LESS THAN RS 7500 P.M, in order to AVAIL THE INPUT TAX CREDIT PAID ON VARIOUS SERVICES? PL RESPOND, THANKS

  13. Baskaran says:

    If RWA collects 7,000 rs/PM from eeach owner ad the total amount comes to 55 lakhs whether GST is payable and the RWA engages a service provider whose TO is 75 lakhs then what is the position regarding GST

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