18% GST is applicable for flat owners whose maintenance charges exceed Rs 7,500 per month.

By Abhay Shah, Realty Quarter

The Ministry of Finance on Monday has announced that the owners of the apartment will pay 18% GST if the maintenance costs paid to the resident welfare association (RWA) exceed Rs 7,500 a month. “A waiver was accessible until 25 January 2018 when contribution charges or share were not higher than Rs 5,000 per month for a single member. With effect from January 25, the limit was raised to Rs 7,500 per month for a single member,” the ministry said.

It stated that if the fees per member exceed Rs 7,500 per month, the whole amount will be taxable. The Ministry stated in a clarification made to its field officers that “if for example, maintenance charges are Rs 9,000/month per member, then 18% GST rate shall be payable on the entire sum of Rs 9,000, and not on Rs 1,500 (Rs 9,000-Rs 7,500). It also states that if the overall turnover of an RWA in a financial year does not exceed Rs 20 lakh, the registration and payment of the GST will not be necessary even if the maintenance fees reach Rs 7,500 a month per member.

“This explanation contradicts the tax position taken by many residential associations. Tax, on the whole, would typically entail higher maintenance costs for residents,” said Abhishek Jain, a tax partner for EY India firm. The Ministry also has explained the monthly cap of Rs 7,500 per month for those who own two or more apartments in the housing society or residential complex independently.