18% GST Rate on Housing Society Maintenance Charges


November 7, 2019

GST on Housing Society Maintenance

Goods and Service Tax (GST) on the security deposit payable by the tenant is undergoing a change which may get some good news for tenants. Simultaneously, alteration in GST for the homeowner may invite onus for the flat holder.

Now flat/homeowners will be required to pay 18% GST rate on society maintenance if they contribute more than Rs 7,500 to resident welfare association (RWA) every month as monthly maintenance charges.

GST Exemption for Maintenance Charges

According to the Finance Ministry, GST will be exempted for those who pay Rs7,500 or more as monthly maintenance charges for the second home to the RWA. And secondly, GST on housing society maintenance charges charged by an RWA from residents will be exempted if such monthly charges are within the limit of Rs 7,500 per member.

GST on Monthly Subscription or Contribution to RWA

According to the rules, RWAs are supposed to take GST on a monthly subscription from the members of RWA if such payment exceeds Rs 7,500 per month for a flat and the total annual turnover of RWA by the means of supplying the goods and services surpasses the limit of Rs 20 lakhs.

For example: If the monthly subscription charges per member exceed Rs 7,500 then the complete amount comes under the tax ambit.

Like if the monthly maintenance charges are Rs 9,000 per member then GST will be levied @18% on the complete amount of Rs 9,000 and not on Rs 9,000-Rs 7,500 i.e. Rs 1,500.

Recommended: GST Rate on Completed Flats

Calculation of Tax liability when a person is possessing two or more flats

The monthly limit of Rs 7500 per member will be applicable individually for each residential apartment owned by a person when he is an owner of two or more flats in the residential complex or housing society.

For example, if a person has two residential apartments in a residential complex and he pays a total monthly contribution of Rs 15,000 (Rs. 7500 + 7500) for the maintenance of each apartment to the RWA, then the GST exemption shall be given on each apartment and so the additional Rs7,500 will be GST exempt.

Availability of ITC on GST

A clear picture of Input Tax Credit which can be claimed by the RWAs has also come on the surface. The Ministry has clarified that RWAs are eligible to claim ITC of Goods and Services Tax (GST) which they have paid on capital goods such as water pumps, generators, community furniture & so on along with goods like pipes, taps and other sanitary fittings. ITC on services like repair and maintenance can also be claimed by RWAs.

Also Read: GST Rate on Under Construction Flats

Amendments Drafted in Model Tenancy Act

The ministry of housing and urban affairs has drafted a Model Tenancy Act wherein the rights of the owner as well as tenant will be highly regarded and kept balanced. Major points on which this draft lays stress on are as follows:

  • Changing rent after a stated time-frame.
  • Fixation of the maximum-security deposit as two and one month’s rent for the residential and non-residential premises respectively.
  • A valid reason for increasing the rent. Like when the owner has paid any hefty amount to bring some facility in the flat or repairing the flat.
  • Introduction of Rent courts and tribunals for the alacrity in delivering justice and verdict of issues.

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