Paying Over Rs 7,500 As Maintenance Charges? You Have To Pay 18% GST

The arrival of the new tax regime, i.e., the Goods and Services Tax (GST) might have made property purchases way more affordable for the common man than they previously were. However, the levy on maintenance charge is higher when compared to earlier, especially if the monthly outgo is already high.

The finance ministry has recently clarified that property owners, who pay over Rs 7,500 every month as maintenance charge to their residents’ welfare associations (RWAs), will have to pay 18 per cent GST on the same.

Under the previous tax regime, maintenance charges were taxed at 15.55 per cent. That included 15 per cent service tax, 0.5 per cent Swachh Bharat tax and a 0.05 per cent non-agriculture tax. Consequently, the change in rates will amount to an additional burden of 2.5 per cent on homeowners.

For computational purposes, the ministry has also clarified that 18 per cent GST will be charged o the entire amount, if the monthly maintenance charge is, say, Rs 9,000. In such a case, the entire amount would be taxable, and not Rs 1,500.

Someone who owns multiple properties within one housing society will have to pay GST separately for each unit, the ministry has said.

"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, the exemption from GST shall be available to each apartment," it said.

RWAs will have to pay GST at the same rate if their annual turnover, by way of supply of services and goods, exceeds Rs 20 lakhs.

The ministry has also clarified that RWAs are entitled to take input tax credit (ITC) of GST paid on capital goods, goods and services. This means ITC would be available to a housing society on purchase of generators, water pumps, lawn furniture, taps, pipes, other sanitary/hardware fillings, etc. The same is true of services such as repair and maintenance.