In light of concerns raised by apartment owners and Resident Welfare Associations (RWAs) regarding the applicability of Goods and Services Tax (GST) on monthly maintenance charges, the Ministry of Finance & Corporate Affairs has issued a formal clarification to eliminate ambiguity and ensure uniform understanding of the law.
The clarification follows a report by The New Indian Express titled “GST Shadow Looms Over Apartment Complexes” (April 11), which highlighted the prevailing confusion among residential communities with respect to GST compliance obligations.
Dual Conditions Must Be Met
As per the Ministry’s statement, GST shall be leviable on monthly maintenance contributions collected by RWAs only if both of the following conditions are satisfied:
-
The aggregate turnover of the RWA exceeds ₹20 lakh in a financial year, and
-
The monthly contribution from a member exceeds ₹7,500 per residential unit.
If either condition is not met, the RWA is not required to register under GST and is not liable to collect or remit GST, even if the individual monthly contribution exceeds ₹7,500.
Clarification on Treatment of Multiple Residential Units
The Ministry has further clarified that in cases where a member owns multiple residential units in a housing society or complex, the threshold of ₹7,500 per month is to be applied separately for each unit. This ensures that ownership of multiple apartments does not automatically result in GST liability, unless the charge per unit crosses the prescribed limit.
Entire Amount Becomes Taxable Once Threshold Is Crossed
Importantly, where the monthly maintenance contribution exceeds ₹7,500 per unit, the entire amount becomes taxable, not merely the excess over ₹7,500.
Illustrative Example:
-
If the monthly maintenance charge is ₹9,000 per apartment, and the RWA’s turnover exceeds ₹20 lakh, GST at 18% shall be applicable on the entire ₹9,000, not just the ₹1,500 exceeding the exemption threshold.
Relief Provided by GST Council in 2018
This exemption threshold was enhanced by the GST Council in its 25th meeting held on January 18, 2018, where the earlier limit of ₹5,000 per month was revised to ₹7,500 per month in order to reduce the tax burden on housing societies and their members.
Conclusion
The clarification provides much-needed relief and certainty for RWAs and apartment owners navigating the complex GST regime. By reiterating that both the turnover threshold and the per-member charge threshold must be breached for GST to apply, the Ministry has ensured that smaller RWAs and societies operating within modest budgets remain outside the ambit of GST compliance.
Stakeholders, including housing societies, tax professionals, and auditors, are advised to review their financial thresholds carefully and ensure appropriate treatment of GST in light of this guidance.
