GST on Apartment Maintenance Charges

The issue of GST on housing society maintenance charges has sparked confusion among housing societies (similarly known as resident welfare associations or RWAs) and apartment owners across India, especially regarding the application of the Rs 7,500 threshold, i.e., whether GST would be charged on the entire amount or excess amount of Rs 7,500. 

In this article, we will discuss whether GST applies to housing maintenance, how the value of supply under GST will be determined, and its impact on apartment owners and housing societies.

What Is Apartment Maintenance?

Maintenance for apartments is the amount that apartment owners pay to their housing societies regularly. These charges are used to upkeep the housing society, for example, the common area, gym and lobby cleaning expenses, security guards, water bills, maintenance of lifts and minor repairs. 

Applicability of GST on Apartment Maintenance

Prior to deciding whether GST applies to apartment maintenance, it is important to note that housing societies are regarded as "persons" under the GST Act, regardless of which state cooperative society act they are registered under. 

Since the housing society charges monthly fees to its residents or members, any services provided by the housing society are considered to be a supply in the course or furtherance of business. Accordingly, the services provided by a housing society are actively covered under GST, subject to certain thresholds discussed below.

As per clarification issued by the GST Council and Circular dated 22/07/2019, GST shall only apply to a housing society when its annual turnover for the financial year exceeds Rs.20 lakhs and monthly maintenance charges per member are more than Rs.7,500.

So, even if monthly maintenance per member is above Rs.7,500 while the housing society's annual turnover is less than Rs.20 lakhs, GST shall not be applicable. 

It is also essential to note that if monthly maintenance is below Rs.7,500, GST will not be applicable, irrespective of the housing society's annual turnover.

An interesting question to consider here is whether the exemption limit will be applied per person or apartment if a person owns two or more apartments in a housing society. In this case, the GST department has clarified that if a member pays maintenance charges for each apartment separately, then the exemption limit of Rs.7,500 shall be applied per apartment.

GST Rate on Apartment Maintenance

The GST rate for apartment maintenance is 18%, which will be applied when monthly maintenance is more than Rs.7,500. For instance, if monthly maintenance is Rs.10,000, GST shall be Rs.1,800 (18% of 10,000) and not on the differential of Rs.2,500 (i.e., Rs.10,000 - Rs.7,500).

Calculation of GST on Maintenance Charges

Let's take the example of a GST-registered housing society that has issued the following items to its members in its monthly bill. 

The overall bill before GST amounts to Rs.16,150, out of which Rs.2,600 will be paid by the housing society directly to municipal authorities. As the balance of Rs.13,550 exceeds the exemption limit of Rs.7,500, the housing society must collect 18% on Rs.13,550, i.e., Rs.2,439, as GST.

The member will have to pay Rs.18,589 to their housing society.

Input Tax Credit (ITC) for Maintenance Charges

A housing society incurs expenses such as contract security services, repair costs, professional services, and capital goods to maintain itself. These vendors may levy GST on their invoices, which the housing society can use as an eligible input tax credit to reduce its overall GST liability. 

The housing society will also need to pay GST under the reverse charge mechanism on certain services, e.g., goods transport, services from legal advocates, or security services from specified entities.

Exemptions and Exclusions from GST

It is pertinent to note that all sums collected by the housing society are not subject to GST. Along with monthly maintenance, the society also collects amounts on behalf of the state municipality, such as property tax, water tax, and non-agricultural tax. These sums should not be considered while calculating GST and computing the threshold, as reiterated in the above illustration.

The exemption of Rs.7,500 shall also be available for apartments used for commercial purposes since they are also members of the housing society. 

The thresholds discussed above are meant to protect small societies from unnecessary GST compliance, but at the same time, if there is even a small increase in monthly maintenance, it would lead to an additional 18% GST on such maintenance, which increases the cost of living for residents. Housing societies would also need to carefully segregate the amounts to be charged under GST to residents and ensure compliance by filing monthly returns and correctly claiming the input tax credit.