In response to mounting confusion among apartment dwellers and Resident Welfare Associations (RWAs) over GST applicability on monthly maintenance charges, the Ministry of Finance and Corporate Affairs has issued a detailed clarification.
Following a report titled "GST shadow looms over apartment complexes" published on April 11, the Press Relations and Information Division, under the Director General (M&C), stepped in to address concerns that have left many housing society members and management committees perplexed.
Also Read: GST Jolt for Karnataka Apartments: 18% Tax on Maintenance Fees Sparks Outrage
No GST If Turnover Below Rs 20 Lakh, Even If Charges Cross Rs 7,500
The clarification underscores that RWAs are not required to register for GST or pay the tax if their aggregate annual turnover is below Rs 20 lakh, even if the monthly maintenance collected per apartment exceeds Rs 7,500.
In contrast, if both conditions are met - that is, the monthly charges exceed Rs 7,500 per member and the annual turnover crosses Rs 20 lakh - GST at 18% will be applicable on the entire amount, not just the excess.
For instance, if an RWA charges Rs 9,000 per flat per month and is registered under GST due to its turnover, the full Rs 9,000 is subject to GST, not merely the Rs 1,500 above the threshold.
Separate Limit for Multiple Apartments
The Ministry has further clarified that individuals owning multiple flats will benefit from the exemption limit on a per-apartment basis. Thus, the Rs 7,500 threshold applies separately for each residential unit owned.
RWAs Can Claim Input Tax Credit (ITC)
Providing some relief, the Ministry noted that under GST, RWAs are eligible to claim Input Tax Credit (ITC) on purchases and services used for maintenance - a benefit not available under the previous VAT regime. This includes ITC on:
- Capital goods like generators, water pumps, furniture, etc.
- Goods such as taps, pipes and hardware fittings
- Services including repairs and routine maintenance
The GST Council had, in its 25th meeting on January 18, 2018, enhanced the exemption limit from Rs 5,000 to Rs 7,500 per month to provide relief to housing societies and their members.
Final Takeaway
The Ministry's clarification aims to provide much-needed clarity to RWAs and residents alike, ensuring smoother compliance and avoiding unnecessary tax burdens. It reiterates that GST is only applicable when both the turnover and monthly maintenance exceed the prescribed thresholds, and offers a silver lining in the form of ITC benefits.
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