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:
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|
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;
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/-.
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).
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/-
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.
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|
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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