Everything You Need to Know About GST on Maintenance Charges
Flat maintenance costs are the contributions that apartment buildings or Resident Welfare Associations (RWAs) receive from the residents in order to fund the maintenance and oversight of shared facilities. These costs often cover cleaning, safety, and maintenance of common areas such as swimming pools, community halls, playgrounds, gyms, lifts, and other essential services that help in the seamless running of the housing society.
On July 22, 2019, the government issued Circular No.109/28/2019-GST to solve concerns about GST on annual maintenance charges demanded by Residential Welfare Associations (RWAs) to their members—the purpose of this circular was to provide clarity on the GST rules governing flat maintenance fees.
Applicable GST on Maintenance Charges
Under the previous service tax framework, housing societies were mandated to register with the service tax laws if the total maintenance charges imposed by the society exceeded Rs. 10 lakhs in a financial year. However, the threshold has been increased to Rs. 20 lakhs under the Goods and Services Tax (GST) system. This means that if the total maintenance charges levied by the housing society exceed Rs. 20 lakhs in a financial year, it is required to register under GST laws and secure a registration number.
It’s important to note that even exempt items such as the recovery of property tax and electricity bills from members should be considered when calculating the threshold of Rs. 20 lakhs. Therefore, a housing society must collect GST from the residents if the overall charges, whether GST is applicable or not, goes beyond Rs. 20 lakhs. Although the registration threshold for a housing society is set at Rs. 20 lakhs, it is not obligated to collect GST on apartment maintenance if the charge for each flat or office is at most Rs 7,500 for a month.
For the imposition of its members’ maintenance charges GST, the housing society must fulfil two criteria:
- The total of the fees collected by the society should surpass Rs 20 lakhs within a financial year, and
- The monthly maintenance fee for a specific flat or office should exceed Rs 7,500.
Therefore, it’s possible that society might not collect GST on housing society maintenance for smaller flats or offices, while it could collect it for larger flats or offices if the maintenance fees are based on the size of the flat or office.
If the monthly maintenance cost for a housing society exceeds Rs. 7500 per home, an 18% Goods and Services Tax (GST) is charged on the total sum.
If an individual possesses multiple homes within a single society, a ‘separate’ limit of Rs. 7500 is recognized for each additional property, each receiving a personal tax-free allowance of Rs. 7500.
Therefore, for GST on maintenance charges to be levied, two conditions need to be satisfied.
| Turnover of a Housing Society (in 1 FY) | Maintenance Charge (Per Month, Per Member) | GST on Maintenance Charge Applicability |
| More than Rs. 20 Lakh | Up to Rs. 7500 | Not Applicable |
| More than Rs. 20 Lakh | More than Rs. 7500 | Applicable |
| Up to Rs. 20 Lakh | Up to Rs. 7500 | Not Applicable |
| Up to Rs. 20 Lakh | More than Rs. 7500 | Not Applicable |
Note: Even if the GST on maintenance charges surpasses INR 7,500 per month per member, the RWA is exempt from applying for GST registration or paying GST if its total income does not reach INR 20 lakhs in a single fiscal year.
Also Read: GST on Apartments
Expenses that are Included:
1. Sinking Fund
As this service is provided to members, it’s taxable and should be factored into the limit of Rs. 7.5k.
2. Property Tax on Common Areas
This must be included in the society maintenance GST when determining the limit (Rs. 7.5 Thousand).
3. Shared Water Cost
If these fees are for regular water usage, they are taxable and included in the limit.
4. Maintenance Fees
These cover administrative expenses, security, and account audits, making them taxable under GST on maintenance charges by society, and subject to deduction from the limit.
5. Use of Shared Areas by Members or Visitors
GST on maintenance charges by society has to be collected as these are taxable charges, and thus, they are considered in the Rs. 7.5 Thousand limit.
6. Standard Services
Facilities like the clubhouse and swimming pool are taxed and have a maximum limit of INR 7,500.
Expenses that are not Included:
1. Parking Fees
Paid by members for parking spaces, these are taxed and are not included in the 7,500 limit. They are charged one-on-one and are not meant for collective use.
2. Property Tax on Private Areas, Parking, and More
Since the society acts as an intermediary, it’s exempt from property tax and not bound by the Rs. 7.5 Thousand limit.
3. Fees for Share Transfers
These are for transfer of shares, particularly in real estate sales, and are taxed; but, because no outside entity is involved, they do not count towards the total limit of Rs. 7.5k.
4. Rental Income
These services, which are specialised and mainly for businesses, are taxable. If the society does not qualify for coverage under GST, it will be liable to rent control measures (RCM) beginning 1st April 2018.
5. Water Costs Collected by the Society for a Single Member
These are exempt from GST on commercial society maintenance charges as they are for a single member and do not violate the limit of Rs. 7.5k.
6. Interest on Default
Since interest on default is a fee for each instance, it’s taxable and not subject to the Rs. 7,500 Limit.
Calculation of GST on Apartment Maintenance Charges
Resident Welfare Associations (RWAs) must follow specified procedures for calculating and submitting GST on apartment maintenance charges.
The GST on maintenance charges is calculated by applying the GST rate applicable to the amount that is subject to tax. The amount subject to tax is determined using the list of charges specified in this blog, and the typical rate of GST on maintenance for such services is 18%.
Here a detailed instructions on how to calculate and submit GST on flat maintenance fees:
Step 1: Identifying Which Charges are Taxable
RWAs should first determine which components of maintenance charges associated with a flat are excluded from GST and which are not.
For instance, it is not necessary to divide expenses according to their taxability if a member’s contributions every month are under INR 7,500. Conversely, the components have to be separated in order to guarantee a precise GST computation.
Step 2: Filing and Submission of GST Returns
After the GST computation is finished, the RWA has to file and submit GST returns by the due dates. This entails supplying data on the taxable amount, the quantity of GST received, and other required details.
Filing Frequency and Compliance Requirements for Housing Societies
A housing society is required to file 37 returns, with three returns per month that cover:
- Consolidated Return – 20th of the following month
- Expense Side – 15th of the following month
- Billing Side – 10th of the following month
- Annual Return GSTR 9 by the end of December following the current year
If a housing society deducts TDS, they must file GSTR7 by the 10th of the following month. Housing Societies are not part of the Composition Scheme.
Resident Welfare Associations are expected to maintain detailed records of all Supply and Expense reports for a period of 72 months for the purpose of audits.
Conclusion
Hopefully, the article has helped to clarify the complexity of housing society’s GST implementation. But you should also be aware that the GST law can potentially apply to buildings that are under construction. The builder is in charge of timely GST collection and submission. Buyers should enquire if there is a legitimate GST number associated with the builder and whether he/she is submitting the amount that was charged by the buyers. It is essential to understand the particulars of the GST on maintenance charges if the flat association has been registered under the GST.
Frequently Asked Questions
1. Is it mandatory for a society to pay GST on maintenance charges to external service providers, even if the society qualifies for an exemption?
Yes, it is. Should the services provided by the vendor fall within the scope of GST regulations, the society is obligated to fulfil its payment obligations according to the applicable tax rate. For instance, the GST amount for services provided by contractors.
2. Does the maintenance of retail establishments or commercial flats within residential complexes require GST payment?
It does, indeed. The upkeep costs of housing the society’s commercial areas are subject to GST. Commercial and residential properties are treated differently; the former must be paid at the correct GST rate since they are taxable supplies subject to GST.
3. Are the fees for transferring shares or the interest due on overdue payments included in the Rs 7500 limit?
No, they are not. The fees for transferring shares are considered taxable but are not taken into account within the Rs 7500 threshold since no third party is involved. Similarly, the interest charged for late payments is a personal fee, taxable but not within the Rs 7500 limit.
4. If a society’s monthly maintenance costs exceed Rs 7500 but its yearly total income is less than Rs 20 lakh, is GST applicable?
No, GST is not applicable in this scenario.
5. Does GST need to be paid for the maintenance fees paid by the residents?
Upkeep fees up to Rs. 7500 per month per resident are GST-exempt. Previously, the exemption was available on a monthly upkeep fee of up to Rs. 5000 per resident. The limit was raised to Rs. 7500 starting from January 25, 2018.