|There has been lot of confusion and ambiguities on the applicability of GST on Monthly Maintenance Charges. Whether entire amount would be liable for GST? If not, what components would be taxable, what would be exempt, whether collections above 7,500/- to be considered or entire amount to be considered.
Advance Ruling Authorities of Maharashtra as well as Telangana have come out with a very clear ruling which clarifies most of the issues on applicability of GST e on Monthly Maintenance charges collected by Housing Society or Resident Welfare Association.
One may note that serial No. 77 of Notification No. 12/2017 as amended vide Notification No. 02/2018 dt: 25.01.2018 states that service by an unincorporated body or a non-profit entity to its own members is exempt up to an amount of Rs. 7500 per member for sourcing goods or services from a 3rd person for the common use of its members in a housing society or a residential complex.
Therefore where the aggregate turnover of a Residents Welfare Association (RWA) exceeds Rs.20 lakhs in a financial year and the amount collected for maintenance per member exceeds Rs.7500/- then the entire amount is chargeable to GST at the rate of 18%.
To illustrate, if the maintenance charges are Rs.9000 per month per member, GST @18% shall be payable on the entire amount and not on the difference amount between Rs. 9000 & Rs. 7500/-.
Further, even if the annual turnover of the RWA is greater than Rs.20 lakhs but the monthly maintenance charged per person is Rs. 7500/- or less, then such RWA need not pay tax on the amounts so collected.
Another issue arises is with regard to applicability of Is GST on monthly collection of common area electricity charge paid by the members in addition to the Rs.7500 monthly maintenance charged on the basis of actual bill divided pro rata and charged to respective member’s flat carpet area?
GST is not leveable on electricity and water charges collected from residents.
The further issue arises as to whether GST is applicable on total monthly maintenance of Rs.7500 per member plus annual sinking fund collected in July or august month in which annual sinking fund will be collected due to monthly collection including annual sinking fund exceeding Rs.7500 per member for that month or only on sinking fund which is over and above Rs.7500 per member?
Any amounts collected periodically along with the monthly maintenance charges are covered under Entry 77 of Notification No. 12/2017. Therefore they are taxable if the total amount collected by the RWA, by whatever name i.e., monthly maintenance or sinking fund etc., exceeds Rs.7500/-.
In short, the total amount collected in any month by RWA from the members i.e., the monthly maintenance charge plus sinking fund amount is liable to tax if it exceeds Rs.7500/-.
A perfect ruling clarifying on all aspects of applicability of GST on collection from members. One needs to keep in mind that wordings of exemption for 7,500/- are applicable to a housing society or a residential complex and not a Commercial /Industrial society