18% GST to be charged monthly if the RWA fees for flats exceeds INR 7,500

18% GST to be charged monthly if the RWA fees for flats exceeds INR 7,500

Several issues have been raised regarding the GST payable on the fees charged by a Residential Welfare Association (RWA) for providing services and goods for the domestic usage or maintenance of its members in a housing society or a residential complex. Finance ministry clarified recently that apartment owner may need to pay an amount of 18% GST if their maintenance charges to resident welfare associations exceed INR 7500 per month. The latest declaration also clarified that if the annual turnover of the RWA doesn’t exceed INR 20 Lakhs, it may not need to take the registration nor pay the GST even if the individual charges from each member are exceeding INR 7500.

 “This clarification is contradictory to the tax position adopted by many residential associations. Tax on the entire consideration would typically entail an increased cost of maintenance for residents,”  – Abhishek Jain, Fiscal Partner of the Consultancy EY India

The ceiling of 7500 per month applies separately to those who own more than one flats in a housing facility or residential complex. It should also be considered that if the individual is paying more than 7500 for maintenance a month, the entire amount will be taxable and not exceeding charge. For instance, if the apartment owner is paying a sum of 10,000 as maintenance charge a month, he or she has to pay  GST at a rate of 18% for the entire amount and not exceeding the amount of 2500. 

Ministry clarified that, before 25th January 2018, the privilege was available if the charges or benefaction fee did not surpass Rs 5,000 per month per member. The limit was further increased to Rs 7500 per month per member with effect from the aforementioned date. 

Even after two years of the implementation of good service tax (GST), some uncertainties crop up concerning the tax structure and implementation. GST on maintenance fees paid by house owners to residents welfare association was such a case and this recent clarification from ministries clarifies and makes the mentioned aspect more transparent.

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