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Finance Ministry Declares Flat owners must pay 18% GST on monthly maintenance of over Rs 7,500

July 31, 2019

Finance Ministry Declares Flat owners must pay 18% GST on monthly maintenance of over Rs 7,500

The Finance Ministry has recently declared that the flat owners will need to pay a GST of 18% to incase the monthly contribution to the RWA or Resident Welfare Association is more than an amount of Rs.7500. According to the new rule of the Finance Ministry, the RWAs are required to collect the GST on a monthly subscription or contribution basis. It should be charged on each flat which exceeds the Rs.7500 mark. The Ministry has also sent the circular which states how the RWA will need to calculate the GST that is payable when the maintenance tax is more than Rs.7500. The Finance Ministry has also declared that there will be exempt only if the maintenance charges are within Rs.7500 per month per member of the housing.

GST or Goods and Services tax has replaced several indirect taxes in India. The Goods and Service Tax Act was passed in the Parliament on the 29th of March 2017. The Act was brought into effect from 1st July 2017. The GST Tax Law is a multi-stage, comprehensive and destination-based tax that is charged on every addition of value. In simple words, GST is one single indirect tax that the citizens of India are liable to pay. It is directly levied on the goods and services which you choose to purchase.

The circular contains these following lines – “In case the charges exceed Rs.7,500 every month per member, the entire amount is taxable. For instance, if the maintenance charges are Rs 9,000 per month per member, GST at 18% shall be payable on the entire amount of Rs 9,000 and not on the amount of (Rs 9,000-Rs 7,500) = Rs 1,500″. The Ministry has also talked about how the tax liabilities will be calculated for the person who has possession of more than two or more flats in that particular housing complex. The Ministry said that in such a case the GST applied with be separate for each flat that has more than Rs.7500 for maintenance. The tax will be applied separately.

The curricular included these following lines – “if a person owns two residential apartments in a residential complex and pays Rs 15,000 per month as maintenance charges towards 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 Ministry further went r on to say that the RWAs have been entitled to take the input tax credit of Goods and Services Tax (GST) which is paid by the capital goods and input services like repair and maintenance.

Previously the tax that would be levied stood anywhere between 8-12% but not it has been increased and stops at 18% if the maintenance amount increases Rs.7500. According to MS Mani, partner at Deloitte India mentioned that buyers will new face strange situation when their buildings under construction in the same housing will be subject to a variable rate of GST as the builder would exercise the rate of the input tax credits.

So you can see why flat owners are required to pay 18% GST on the monthly maintenance of Rs.7500 for each month per member. Flat owners are requested to put the new rule into effect immediately or else the law will kick in automatically and they’ll be charged with it.

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