Implication of GST on Housing Society

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Hemant Joshi
Senior Manager - CRM & New Business
Implication of GST on Housing Society
The Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 109/28/2019-GST on 22nd July 2019, providing clarity on various issues related to GST applicable to Residential Welfare Associations (RWAs). This circular addresses ambiguities surrounding monthly maintenance contributions, multiple apartment ownership, registration requirements, and input tax credit (ITC) reversal for RWAs.
GST on Monthly Maintenance Charges
Key Points:

  1. Threshold Limit for GST Exemption

  1. Maintenance charges up to Rs. 7,500 per month per member are exempt from GST.

  1. If the maintenance charges exceed Rs. 7,500 per month per member, GST is charged on the entire amount and not just the excess. For example, if the maintenance charge is Rs. 9,000 per month per member, GST @18% will be levied on Rs. 9,000 and not on Rs. 1,500 (i.e., Rs. 9,000 – Rs. 7,500).

  1. Conclusion

  1. Once the maintenance charges exceed the prescribed limit of Rs. 7,500, GST is applicable on the whole amount and not just the portion exceeding Rs. 7,500.

GST on Multiple Residential Apartments
Key Points:

  1. Applicability of GST Exemption

  1. A person owning two or more residential apartments in a housing society is considered a separate member for each apartment.

  1. The exemption limit of Rs. 7,500 per month per member applies separately for each apartment. For instance, if an individual owns two apartments and pays Rs. 15,000 (Rs. 7,500 for each apartment), the entire amount is exempt from GST.

  1. Conclusion

  1. For individuals owning multiple apartments, the Rs. 7,500 exemption limit is applicable separately to each apartment, ensuring GST exemption for each.

GST Registration and Turnover Threshold
Key Points:

  1. Registration Requirement

  1. RWAs with an aggregate turnover of Rs. 20 lakhs or less in a financial year are not required to register for GST or pay GST, even if maintenance charges exceed Rs. 7,500 per month per member.

  1. Registration and GST payment are mandatory if the turnover exceeds Rs. 20 lakhs and maintenance charges are more than Rs. 7,500 per month per member.

Case Scenarios:
Condition
case Aggregate Turnover Common Maintenance per member per month Liable to take registration
I Less than Rs. 20 Lakhs Less than Rs. 7,500/- NO
II Less than Rs. 20 Lakhs More than Rs. 7,500/- NO
III More than Rs. 20 Lakhs Less than Rs. 7,500/- YES
IV More than Rs. 20 Lakhs More than Rs. 7,500/- YES

  1. Conclusion

  1. RWAs must register for GST and pay applicable taxes if the annual turnover exceeds Rs. 20 lakhs

Reverse Charge Mechanism (RCM) Applicability
Key Points:

  1. Compulsory RCM Services

  1. Services from Goods Transport Agencies.

  1. Legal services from advocates or firms of advocates.

  1. Security services from providers other than companies (e.g., Proprietary Concern or Partnership Firm).

  1. Supplier’s GST Payment

  1. If the supplier includes GST in their invoices and pays the liability, the recipient (RWA) must still pay tax under RCM.

  1. Conclusion

  1. RWAs must comply with RCM provisions for specified services, ensuring proper GST payment even if the supplier already pays the tax.

Proportionate Reversal of ITC
Key Points:

  1. ITC Reversal

  1. RWAs exempt from GST on member contributions must reverse proportionate ITC as per Rule 42 of the CGST Rules.

  1. This rule mandates reversal of ITC for supplies used partially for taxable and exempt supplies.

  1. Conclusion

  1. RWAs claiming GST exemption must proportionately reverse ITC, bearing the cost of goods and services procurement.

  1. Immediate Compliance

  1. Based on the circular, RWAs must adopt the clarified provisions immediately, ensuring compliance with GST laws.

  1. Enclosures

  1. Circular No.: 109/28/2019-GST dated 22/07/2019. 1. circular-cgst-109282019 – GST dated 22072019 (1).pdf

  1. Exemption Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017. 2. Notification12-CGST_1_Exemption (1).pdf

  1. RCM on Security Charges – Notification No. 29/2018-Central Tax (Rate) dated 31/12/2018. 3. RCM on Security Charges_010119.pdf

  1. Rules for Claiming Input Tax Credit. 4. ITC_Rule 42 & 43.pdf

  1. By adhering to these clarifications, RWAs can ensure accurate GST compliance and avoid potential legal challenges.

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