In the present article, we would understand the applicability of GST on subscription income/maintenance charges collected by the Residential Welfare Association. However, before moving further into the taxability, first of all, let us understand what this Residential Welfare Association is?

Residential Welfare Association (from now on referred to as RWA) is an association of persons who owns houses in a particular society/township etc. RWA is formed by electing persons from the members holding the house in a specific society/township. RWA supervises day to day operations of the society/township, ensures a safe and secure environment for the members, resolves problems of the members etc.

To comply with the services, maintenance charges are paid by the owner of the society/township to the RWA. There was a lot of confusion with regard to the applicability of GST on the maintenance/subscription/other amount charged by the RWA for providing services and goods for the common use of the members of the society/township.

In order to clear up the confusion, the Government came up with circular no. 109/28/2019-GST dated 22nd July 2019 which is explained hereunder –

Issue involved –

GST applicability on the maintenance charges collected by the RWA for sourcing of goods and services for the common use of the members of the society/township.

Exemption under GST –

Value based exemption has been made available to the maintenance charges so collected by the RWA which is as under –

Effective Notification Exemption Period
Notification no. 12/2017 – Central Tax (Rate) dated 28th June 2017 [refer sl. no. 77] Maintenance/subscription charges paid by the members to RWA up to an amount of INR 5000 per month per member is exempted under GST. 1st July 2017 to 24th January 2018
Notification no. 2/2018 – Central Tax (Rate) dated 25th January 2018 [refer point no. (p)] Maintenance/subscription charges paid by the members to RWA up to an amount of INR 7500 per month per member is exempted under GST. 25th January 2018 till date

It is important to note that the exemption from GST is available only if the amount charged by RWA from its members doesn’t exceed INR 7500 (or INR 5000). However, if the amount exceeds INR 7500 or INR 5000, then, the GST would be payable on the entire amount and not just on the exceeding amount.

For example, suppose, RWA charges INR 8000 per month per member, then, the GST would be payable on the entire INR 8000 and not on INR 500 (INR 8000 – INR 7500).

Taxability and registration under GST –

After going through the exemption, let us understand the taxability of the maintenance charges collected by the RWA. GST would get applicable/payable by RWA on the maintenance charges collected only if the following two conditions are satisfied –

1. If the maintenance/subscription amount collected is more than INR 7500 per month per member; and

2. The annual aggregate turnover of RWA by way of supplying goods and services exceeds INR 20 Lakhs.

Once both the above conditions are satisfied, RWA is required to obtain GST registration and also would get liable to pay appropriate GST.

Input tax credit –

When the question of GST taxability comes, the obvious question regarding the availability of input tax credit will also arise. The circular clarifies that, RWA is entitled for the following input tax credit –

  • Input tax credit of GST paid on capital goods like generators, lawn furniture, water pumps etc.
  • Input tax credit of GST paid on input services like repair and maintenance service.
  • Input tax credit of GST paid on input goods like taps, pipes, hardware fittings, other sanitary fittings etc.

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7 Comments

  1. Mahadevan says:

    Dear Mr. Ramanathan TK,
    Taxability of corpus fund is a contentious issue. We have Advance ruling where they have held that GST shall be levied on corpus fund collections, even if they are capitalised in the books. Hence, it may be applicable in your case if the corpus is used to earn interest to meet the expenses.
    You can write to mahadevanb1994@gmail.com in case of further queries

  2. P J Joseph says:

    Housing societies receiving security services on RCM basis is required to compulsorily take GST Registration even if:
    (a) Maintenance paid by each Resident is less than Rs7500.00 and
    (b) The aggregate turn over is less than Rs20 lacs

    Kindly clarify.

    1. Mahadevan says:

      Though the Act says that it is mandatory for RCM persons to take registration, it may not apply to you as the RCM entry for security says-“Any registered person” being the person liable to pay under RCM. Hence, no registration is reqd., if t/o less than 20 lakhs. I differ with the opinion of the author w.r.t registration. Even if membership fees exceeds Rs.7500, as long as turnover does not cross Rs.20 Lakhs, it registration shall not be reqd. (As stated in the circular as well-Para 2 of circular no.109 dated 22nd July 2019

  3. Vanita Gupta says:

    Regarding applicability of GST it is written that both the conditions have to be satisfied. Does this means that if per month maintenance charges are less than Rs.7500 but aggregate turnover is more than 20 lakhs which includes maintenance charges as well as rental income from commercial shops etc, then GST registration is not needed and there is no need to charge GST on rental income?

    1. Mahadevan says:

      GST Registration will be required if aggregate turnover exceeds Rs.20 Lakhs which is sum of exempt and taxable turnover. In your case, it has exceeded Rs.20 Lakhs.

      As far as taxability is concerned, you can avail exemption w.r.t GST on maintenance charges. However you may have to pay GST on commercial shop rent. ITC may also have to be reversed.

      You can contact-mahadevanb1994@gmail.com for clarifications

    1. Mahadevan says:

      Dear Mr. Ramanathan TK,
      Taxability of corpus fund is a contentious issue. We have Advance ruling where they have held that GST shall be levied on corpus fund collections, even if they are capitalised in the books. Hence, it may be applicable in your case if the corpus is used to earn interest to meet the expenses.
      You can write to mahadevanb1994@gmail.com in case of further queries

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