GST On Apartment Maintenance: What Residents Need To Know When The Builder Is In Charge

Residents living in housing societies often pay a monthly maintenance fee for the upkeep of common areas and services. But when it comes to Goods and Services Tax (GST), who collects the fee, and how much is charged, can make a big difference. Under current tax rules, if a society is managed by a registered Residents Welfare Association (RWA) or cooperative housing society, residents are exempt from paying GST on maintenance fees if two conditions are met: the RWA's total turnover is less than Rs 20 lakh (Rs 10 lakh in some states), and the monthly maintenance per unit does not exceed Rs 7,500. Both thresholds must be crossed before GST is applicable.

However, many new societies take time to form an RWA, leaving the builder in charge of maintenance. In such cases, GST applies differently and often more stringently.

When Does GST Apply?

When maintenance charges per apartment exceed Rs 7,500 and the RWA's turnover exceeds Rs 20 lakh, the GST at 18 per cent kicks in. However, there is a catch: the tax is levied on the entire maintenance amount, not just the amount over Rs 7,500. For example, if you pay Rs 9,000 every month, you will be taxed on the full Rs 9,000. This means that GST will be applicable on the whole Rs 9,000 based on the new price, and not only on the extra Rs 1,500. The issue was clarified in CBIC Circular No.109/28/2019, dated 22nd July, 2019.

Compliance and SAC Code

Builders charging maintenance fees must obtain a separate GST registration under Service Accounting Code (SAC) 995419 when providing services related to building maintenance and renovations. They do not have a legal mandate to levy GST on such collections without this update.

If your society hasn't formed an RWA and the builder is still handling maintenance, expect GST to be charged, often at the full 18 per cent, regardless of the fee amount. The only way to avoid this is by forming an RWA or society that qualifies for the exemption.

Residents should check whether their maintenance bills comply with GST laws and whether the service provider, be it a builder or RWA, is registered appropriately. Knowing who's in charge can mean the difference between a tax-free bill and an 18 per cent hike.