GST and its impact on maintenance charges
GST is an indirect tax imposed on the supply of goods and services. GST Law has taken the place of many indirect tax laws that existed in India previously. The Goods and Services Tax has transformed the Indian taxation system. The GST Act was passed in the Lok Sabha on 29th March 2017 and came into effect on 1st July 2017.
Maintenance charges were subject to the levy of service tax earlier, if the aggregate of the maintenance charges levied by the housing society exceeded Rs 10 lakhs in a financial year. Under the GST, this threshold limit has been raised to Rs 20 lakhs. So, a housing society will have to collect GST from its members, if the aggregate of the charges during a financial (whether subject to GST or not) exceeds Rs 20 lakhs. The society, therefore, will have to obtain a registration under the GST for this purpose.
However, even if the society obtains this registration, GST cannot be levied, if the maintenance charge for a flat does not exceed Rs 5,000 per month.
So, in case the collection of the charges levied by the housing society does not exceed Rs 20 lakhs in a financial year, it need not register under the GST. Therefore, it need not levy GST on the maintenance charges collected from its apartment owner, even though the individual monthly charges for a flat may exceed Rs 5,000.
In case of housing society having different sizes of flats, it may happen that the monthly bill for smaller flats may be less than Rs 5,000 and thus, those flats are outside the levy of the GST. The other members having larger flats in the same housing society, may have to pay GST.
On what component of maintenance charges is the GST levied
It is not that the society shall collect the GST on all the components recovered from the apartment owners. The housing society will not collect GST from you, on charges in the nature of repayment of expenses incurred by the society and recovered from members. These include various taxes paid by the housing society on behalf of the apartment owners, like property tax, water bill, municipal tax, non-agricultural land tax, and much more.
Similarly, contribution towards the sinking fund is also omitted from the scope of GST. However, the housing society will have to charge GST on the contribution towards the repairs funds, collected from its owners.
Rate of GST, input tax credits, and the reverse charge mechanism
The housing society will have to pay GST at 18 percent, on the maintenance charges collected from its members. The housing society can avail of the input credit, for the GST paid by it on various supplies received by it. But it cannot reduce the rate of GST being charged to its members. The society will also have to pay GST under the reverse charge mechanism, in case it is registered under GST, on all the services or goods received by it from unregistered suppliers. The society will be allowed to claim set off of the GST paid on such supplies, against its GST responsibility with respect to maintenance charges.
It can also happen that the society may be paying GST at different rates, for the goods and services purchased by it and availing of the input credit on it.
Credit- Taken from housing.com blog