Liability of GST on Maintenance Charges Collected by a Residence Welfare Association – An Overview
Residence Welfare Association is a voluntary group has been formed by members of a Housing Society. A residence welfare Association is a collective body of persons, who stay in a residential co-operative society. The object of Housing Society is to provide its members with open plots for housing, dwelling houses or flats; or if open plots, the dwelling houses or flats are already acquired, to provide its members common certain amenities and services to its members, be it collecting statutory dues from its members and remitting to statutory authorities such as property tax, electricity charges, water tax, etc.
The taxable event under GST is “supply”. Section 9 of the CGST Act, 2017 prescribes levy of GST is on supply of goods and services. Thus, the service provided by a resident welfare association or a housing society to its members is to be treated as service provided by one person to another is liable to GST.
As per section 2(17)(e) of the CGST Act, 2017, 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 is deemed to be a business. The activities of the housing society would thus attract the levy of GST and the housing society would be required to register and comply with the GST Law.
Threshold limit of Registration:
Section 22 of the CGST Act, 2017 prescribed that a supplier of services is required to take registration, if his turnover in the previous financial year exceeds Rs 20 lacs. Accordingly, if the turnover of a Residence welfare association or a housing society is above Rs.20 lakhs, it needs to take registration and discharge tax liability on services so supplied to the members.
Rate of GST: (As on 28.06.2017)
Notification No.12/2017-C.T.(Rate), dated 28-06-2017 prescribed the rate of GST on services provided by a nonprofit entity to its members by way reimbursement of charges or share of contribution so collected as under:
|Sl.No||Chapter Heading / Service Code||Description of Services||Rate (per cent.)||Condition|
|77||Heading 9995||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 – (a) as a trade union; (b) for the provision of carrying out any activity which is exempt from the levy of Goods and service Tax; or (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.||NIL||NIL|
Rate of GST: (As on 25.01.2018)
Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017 at sr.no.77 as amended by Notification No.2/2018-C.T dated 25-1-2018 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 –
(a) as a trade union;
(b) for the provision of carrying out any activity which is exempt from the levy of Goods and service Tax; or
(c) up to an amount of Rs.7500/ 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
In view of the provision contained at (c) above, a society may be registered under GST, however if the monthly contribution received from members is less than Rs.7500/-, (and the amount is for the purpose of sourcing of goods and services from a third person for the common use of its members), no GST is to be charged by the housing society on the monthly bill raised by the society. However, GST would be leviable if the monthly contribution exceeds Rs.7500/-.
In addition to monthly, certain statutory dues such as property tax, electricity charges etc., form part of the monthly maintenance bill raised by the society on its members. These charges should be excluded while computing the monthly limit of Rs.7500/- in terms of clause (c) of Sr.no.77 of Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017 as amended by Notification No.2/2018-C.T dated 25-1-2018.
Thus, if monthly bill is more than Rs.7500/- then GST will be applicable on amount in excess of Rs.7500/-.
Clarification issued by the Government:
C.B.I &C, Tax Research Unit vide its F.No.332/04/2017-TRU released FAQs on levy of GST on supply of services by the Co-operative society to its members and has clarified as under.
|1||The society collects the following charges from the members on quarterly basis as follows:
1. Property Tax-actual as per Municipal Corporation of Greater Mumbai (MCGM)
2. Water Tax- Municipal Corporation of Greater Mumbai (MCGM)
3. Non- Agricultural Tax- Maharashtra 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.
From the tax/ charge as listed above, on which GST is not applicable.
|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 MCGM 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.
IN RE: TVH Lumbini Square Owners Association, Purasawalkam, the Tamil Nadu Authority for Advance Ruling (AAR):
Issue: Whether the GST amount will payable over and above the threshold limit of Rs.7500/- ?
Brief facts: TVH Lumbini Square Owners Association, Purasawalkam. It is registered under the Societies Act, Goods, and services tax Act and also Income Tax assessees. The society consists of 9 residential blocks and there are 448 flats. It is currently collecting maintenance charges on a quarterly basis at ₹3.50 per square feet per month along with applicable GST. Earlier, the maintenance charges in excess of ₹5,000 attracted GST and the limit was revised in excess of ₹7,500 effective from January 25, 2018.
The association sought clarification as to whether a resident must pay GST on the value over and above ₹7,500 or on the entire amount. For example, if the maintenance charge is ₹8,000 for an individual resident, does GST liability arise on the value over and above ₹7,500 (on ₹500) or on the entire amount of ₹8,000? The AAR ruling is that the GST is applicable on the entire amount.
Ruling of AAR: It has held that if the amount collected by a registered housing society/resident welfare association exceeds ₹7,500 per month per flat, Goods and Services Tax of 18% is payable on the entire amount and not on the difference amount.
Provisions Changes: As on 22.07.2019:
C.B.I & C, vide its Circular No.109/28/2019- GST dated 22-07-2019 has further clarified issues related to GST on monthly subscription / contribution charged by a Residential Welfare Association from its members and the GST payable on the amount charged by a Residential Welfare Association for providing services and goods for the common use of its members in a housing society or a residential complex in the below Table:
|1||Are the maintenance charges paid by residents to the Resident Welfare Association (RWA) in a housing society exempt from GST and if yes, is there an upper limit on the amount of such charges for the exemption to be available?||Supply of service by RWA (unincorporated body or a non- profit entity registered under any law) to its own members by way of reimbursement of charges or share of contribution up to an amount of Rs. 7500 per month per member for providing services and goods for the common use of its members in a housing society or a residential complex are exempt from GST. Prior to 25th January 2018, the exemption was available if the charges or share of contribution did not exceed Rs 5000/- per month per member. The limit was increased to Rs. 7500/- per month per member with effect from 25th January 2018. [Refer clause (c) of Sl. No. 77 to the notification No. 12/2018- Central Tax (Rate) dated 28.06.2019]|
|2||A RWA has aggregate turnover of Rs.20 lakh or less in a financial year. Is it required to take registration and pay GST on maintenance charges if the amount of such charges is more than Rs. 7500/- per month per member?||No. If aggregate turnover of an RWA does not exceed Rs.20 Lakh in a financial year, it shall not be required to take registration and pay GST even if the amount of maintenance charges exceeds Rs. 7500/- per month per member.
RWA shall be required to pay GST on monthly subscription/ contribution charged from its members, only if such subscription is more than Rs. 7500/- per month per member and the annual aggregate turnover of RWA by way of supplying of services and goods is also Rs. 20 lakhs or more.
|3||Is the RWA entitled to take input tax credit of GST paid on input and services used by it for making supplies to its members and use such ITC for discharge of GST liability on such supplies where the amount charged for such supplies is more than Rs. 7,500/- per month per member?||RWAs are entitled to take ITC of GST 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.|
|4||Where a person owns two or more flats in the housing society or residential complex, whether the ceiling of Rs. 7500/- per month per member on the maintenance for the exemption to be available shall be applied per residential apartment or per person?||As per general business sense, a person who owns two or more residential apartments in a housing society or a residential complex shall normally be a member of the RWA for each residential apartment owned by him separately. The ceiling of Rs. 7500/- per month per member shall be applied separately for each residential apartment owned by him. For example, if a person owns two residential apartments in a residential complex and pays Rs. 15000/- per month as maintenance charges towards maintenance of each apartment to the RWA (Rs. 7500/- per month in respect of each residential apartment), the exemption from GST shall be available to each apartment.|
|5||How should the RWA calculate GST payable where the maintenance charges exceed Rs. 7500/- per month per member? Is the GST payable only on the amount exceeding Rs. 7500/- or on the entire amount of maintenance charges?||The exemption from GST on maintenance charges charged by a RWA from residents is available only if such charges do not exceed Rs. 7500/- per month per member. In case the charges exceed Rs. 7500/- per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs. 9000/- per month per member, GST @18% shall be payable on the entire amount of Rs. 9000/- and not on [Rs. 9000 – Rs. 7500] = Rs. 1500/-|
Conclusion: In view of Ruling of Tamil Nadu Authority for Advance Ruling, C.B.I. & C has issued the cited circular to overcome the issues on RWA or housing societies. Even though a clarification was earlier issued by C.B.I &C, there were numerous queries on this issue regarding the GST payable on the amount charged by a Residential Welfare Association for providing services for the common use of its members in a housing society or a residential complex. It is pertinent to mention that C.B.I & C, circular dated 22.07.2019 on RWA clarifying that GST is payable on entire amount of maintenance charges may not be free from litigation in the coming days.