The Ministry of Finance & Corporate Affairs has sought to clear the confusion among apartment owners and resident welfare associations (RWAs) over imposition of Goods & Services Tax (GST) on monthly maintenance.
Following The New Indian Express article “GST shadow looms over apartment complexes” on April 11, which highlighted the prevailing confusion among residents in apartment complexes over GST imposition, the office of Director General (M&C), Press Relations & Information Division, Ministry of Finance & Corporate Affairs, has clarified that if the 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 7,500 per month per member.
The RWA shall be required to pay GST on monthly subscription/contribution charged from its members only if such subscription is more than Rs 7,500 per month per member and the annual aggregate turnover of RWA by way of supply of services and goods is also Rs 20 lakhs or more.
It has further clarified that for those who own two or more residential apartments in a housing society or a residential complex, the ceiling of Rs 7,500 per month per member shall be applied separately for each residential apartment owned by them.
In case the charges exceed Rs 7,500 per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs 9,000 per month per member, the GST of 18% shall be payable on the entire amount of Rs 9,000, and not just on the difference of Rs 1,500.
The GST Council on January 18, 2018, in its 25th meeting, enhanced the exemption limit from the initial Rs 5,000 to Rs. 7,500 per month to benefit RWAs and housing societies.
Moreover, it said that under GST, the tax burden on RWAs is lower as the latter are entitled to Input Tax Credit (ITC) in respect of taxes paid by them on capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes, other sanitary/hardware fittings etc.) and input services such as repair and maintenance services. ITC of VAT paid on goods and capital goods was not available in the pre-GST period and these were a cost to the RWAs. ITC lets businesses reduce their tax liability by claiming credits on GST paid for business-related purchases.
Source: The New Indian Express
