GST payable on maintenance charges
Real Estate

GST payable on maintenance charges

The finance ministry on July 22, 2019, had mentioned that a GST rate of 18 per cent applied to the flat owners if their monthly contribution to the residents’ welfare association (RWA) exceeded Rs 7,500.

With this background, a Nariman Point cooperative housing society (CHS) had filed an appeal against this order. But its efforts proved ineffectual as the GST Appellate authority for advance rulings, Maharashtra bench upheld the previous ruling and stated that GST has to be collected on the maintenance charges if it exceeds the threshold limit.

July 14 ruling of Authority for Advance Ruling (AAR) Maharashtra stated that activities of Nariman CHS towards its members were “taxable supplies” under the GST Act.

Various tax experts were not satisfied with this ruling as they did not think that these activities could be construed as ‘supply’ of services. Also, often certain tax scrutineer’s consider temporary tax cuts as a good fix in a downturn.

However, the Nariman CHS went on to highlight the point that it did not “supply” any service to its members. Also, in its appeal, the CHS had mentioned that AAR had failed to consider various judicial decisions especially that of the Supreme Court in 2009 case of Calcutta club which dealt with the ‘doctrine of mutuality’. This principle elucidates that the society and its members are not distinct entities further helping CHS in consolidating the point that CHS was not supplying any goods or services and henceforth does not come under the purview of GST.

But the appellate bench negated all these contentions and stated that the Supreme Court’s order was not applicable here as this order was relevant during the sales tax regime and the concept of supply has evolved to develop a wider meaning under the GST law.

To reiterate, the following conditions need to be satisfied for the application of GST on maintenance charges:
1. The aggregate of the charges levied by the society should exceed Rs 20 lakhs in a financial year and
2. The amount of the monthly maintenance charge for the particular flat or office should exceed Rs 7,500.

So, if the aggregate of maintenance charges levied by the housing society exceeds the threshold of Rs 20 lakhs in a financial year, it has to register itself under the GST laws and obtain a registration number.

Additionally, it is important to note that society does not have to levy GST on all the components billed in the invoice to the members. For example, the housing society cannot levy GST on charges which are in the nature of reimbursement of expenses is such that it is incurred by the society and recovered from its members such as various taxes and utility payments made by the housing society on behalf of the members. However, the housing society has to levy GST on the contribution made by the members towards the repairs funds.


The finance ministry on July 22, 2019, had mentioned that a GST rate of 18 per cent applied to the flat owners if their monthly contribution to the residents’ welfare association (RWA) exceeded Rs 7,500.With this background, a Nariman Point cooperative housing society (CHS) had filed an appeal against this order. But its efforts proved ineffectual as the GST Appellate authority for advance rulings, Maharashtra bench upheld the previous ruling and stated that GST has to be collected on the maintenance charges if it exceeds the threshold limit.July 14 ruling of Authority for Advance Ruling (AAR) Maharashtra stated that activities of Nariman CHS towards its members were “taxable supplies” under the GST Act.Various tax experts were not satisfied with this ruling as they did not think that these activities could be construed as ‘supply’ of services. Also, often certain tax scrutineer’s consider temporary tax cuts as a good fix in a downturn.However, the Nariman CHS went on to highlight the point that it did not “supply” any service to its members. Also, in its appeal, the CHS had mentioned that AAR had failed to consider various judicial decisions especially that of the Supreme Court in 2009 case of Calcutta club which dealt with the ‘doctrine of mutuality’. This principle elucidates that the society and its members are not distinct entities further helping CHS in consolidating the point that CHS was not supplying any goods or services and henceforth does not come under the purview of GST.But the appellate bench negated all these contentions and stated that the Supreme Court’s order was not applicable here as this order was relevant during the sales tax regime and the concept of supply has evolved to develop a wider meaning under the GST law.To reiterate, the following conditions need to be satisfied for the application of GST on maintenance charges:1. The aggregate of the charges levied by the society should exceed Rs 20 lakhs in a financial year and2. The amount of the monthly maintenance charge for the particular flat or office should exceed Rs 7,500.So, if the aggregate of maintenance charges levied by the housing society exceeds the threshold of Rs 20 lakhs in a financial year, it has to register itself under the GST laws and obtain a registration number.Additionally, it is important to note that society does not have to levy GST on all the components billed in the invoice to the members. For example, the housing society cannot levy GST on charges which are in the nature of reimbursement of expenses is such that it is incurred by the society and recovered from its members such as various taxes and utility payments made by the housing society on behalf of the members. However, the housing society has to levy GST on the contribution made by the members towards the repairs funds.

Next Story
Products

Viva ACP Launches FR A1-Rated Honeycomb Panels for Fire Safety

Viva, Asia’s largest manufacturer and supplier of aluminium composite panels (ACP) introduced its FR A1-rated Honeycomb Panels, setting a new industry benchmark for fire safety and architectural excellence. Engineered to deliver exceptional performance, these panels combine advanced fire-resistance technology with aesthetic versatility, offering a revolutionary solution for safety-critical environments.The FR A1 rating represents the highest standard of fire resistance under the European Standard EN 13501-1, signifying non-combustibility and zero contribution to fire, smoke, or toxic emissio..

Next Story
Real Estate

Almal Real Estate Expands into Commercial, Global Markets

Almal Real Estate Development is soon to announce its upcoming expansion into new verticals and international markets as part of its strategic growth plans for 2030. The company, known for its innovative luxury residential and hospitality developments, is preparing to diversify into the commercial sector with the introduction of The Smart Space, a network of business centers in UAE featuring five-star amenities. Additionally, Almal is entering new markets in Bali and Thailand as a community developer, focusing on villa and townhouse projects.The expansion into the commercial real estate sector..

Next Story
Infrastructure Urban

NABARD Approves Rs 9.03 Billion for 127 Projects in Himachal

The Himachal Pradesh government has secured approval from the National Bank for Agriculture and Rural Development (NABARD) for 127 projects worth Rs 9.03 billion for the 2024-25 fiscal, Chief Minister Sukhvinder Singh Sukhu announced. During a meeting with MLAs from Kangra, Kullu, Kinnaur, Solan, Chamba, Bilaspur, and Lahaul-Spiti districts to discuss priorities for the 2025-26 budget, Sukhu said the approved projects include 50 MLA-priority schemes under the Public Works Department, valued at Rs 4.12 billion, and 23 MLA-priority schemes under the Jal Shakti Vibhag, costing Rs 1.79 billio..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?