Flat owners to pay 18% GST on RWA maintenance fee

Last Updated at: September 07, 2020
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The move to defer tax withholding on ecommerce operators and widening of collection at source provisions to 1 October 2020 is likely to provide sufficient time for gearing up internal systems to comply with these provisions.

18% GST on flat owners on monthly RWA fee of over Rs 7,500
The government recently said flat owners who pay more than Rs 7,500 monthly maintenance fees to resident welfare associations, or RWAs, would be charged 18% Goods and Services Tax, PTI reported. So, those with more than one property in the same housing society will be eligible for an exemption separately in each flat.

 

As per the rules, RWAs are required to collect GST on monthly subscription/contribution charged from its members if such payment is more than Rs 7,500 per flat per month.

 

Recently, on 22nd July, the Finance Ministry has clarified the amount of tax liability for flat owners. The pre-condition for attracting the 18 per cent GST is that if the monthly maintenance fees paid by the owner to the Resident Welfare Association [RWA] is more than Rs 7,500. The Resident Welfare Association is responsible for collecting GST on fees charged from the said members of the organisation.

If this payment exceeds the statutory bar of Rs.7,500 per flat per month and the annual turnover of RWA by way of supply of services and goods exceeds Rs 20 lakh. Via a circular on 22nd Jul 2019, the Ministry of  Finance clarified that an exemption from the GST is only available to flat owners if the charges per month per RWA member does not exceed  Rs. 75,000/-.

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The circular read as follows:

“In case the charges exceed Rs 7,500 per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs 9,000 per month per member, GST @18 per cent shall be payable on the entire amount of Rs 9,000 and not on (Rs 9,000-Rs 7,500) = Rs 1,500.”

The Ministry also cleared the air on the calculation of the tax liability for a person who owns two or more flats in the housing society or residential complex. It has been clarified that such cases the ceiling of Rs 7,500 per month per member shall be applied separately for each residential apartment owned by him.

The notice read that if a person owns two residential apartments in a residential complex and pays Rs 15,000 per month as maintenance charges towards the maintenance of each apartment to the RWA (Rs. 7500/- per month in respect of each residential apartment), the exemption from GST shall be available to each apartment. The notice by the Ministry of Finance also clarifies that RWAs are entitled to take input tax credit or ITC, as it is commonly known, of Goods and Services Tax (GST) paid by them on capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes, other sanitary/hardware fillings etc.) and input services such as repair and maintenance services

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Flat owners to pay 18% GST on RWA maintenance fee

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The government recently said flat owners who pay more than Rs 7,500 monthly maintenance fees to resident welfare associations, or RWAs, would be charged 18% Goods and Services Tax, PTI reported. So, those with more than one property in the same housing society will be eligible for an exemption separately in each flat.

 

As per the rules, RWAs are required to collect GST on monthly subscription/contribution charged from its members if such payment is more than Rs 7,500 per flat per month.

 

Recently, on 22nd July, the Finance Ministry has clarified the amount of tax liability for flat owners. The pre-condition for attracting the 18 per cent GST is that if the monthly maintenance fees paid by the owner to the Resident Welfare Association [RWA] is more than Rs 7,500. The Resident Welfare Association is responsible for collecting GST on fees charged from the said members of the organisation.

If this payment exceeds the statutory bar of Rs.7,500 per flat per month and the annual turnover of RWA by way of supply of services and goods exceeds Rs 20 lakh. Via a circular on 22nd Jul 2019, the Ministry of  Finance clarified that an exemption from the GST is only available to flat owners if the charges per month per RWA member does not exceed  Rs. 75,000/-.

Get Your Property Registered

The circular read as follows:

“In case the charges exceed Rs 7,500 per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs 9,000 per month per member, GST @18 per cent shall be payable on the entire amount of Rs 9,000 and not on (Rs 9,000-Rs 7,500) = Rs 1,500.”

The Ministry also cleared the air on the calculation of the tax liability for a person who owns two or more flats in the housing society or residential complex. It has been clarified that such cases the ceiling of Rs 7,500 per month per member shall be applied separately for each residential apartment owned by him.

The notice read that if a person owns two residential apartments in a residential complex and pays Rs 15,000 per month as maintenance charges towards the maintenance of each apartment to the RWA (Rs. 7500/- per month in respect of each residential apartment), the exemption from GST shall be available to each apartment. The notice by the Ministry of Finance also clarifies that RWAs are entitled to take input tax credit or ITC, as it is commonly known, of Goods and Services Tax (GST) paid by them on capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes, other sanitary/hardware fillings etc.) and input services such as repair and maintenance services

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.