Are you staying in a flat? Paying monthly maintenance charges or monthly contribution or monthly subscription of over Rs 7,500 to Resident Welfare Association (RWA)? Then it's certainly a big blow to the flat owners and residents.
According to the latest circular issued by Finance Ministry on Monday, flat owners, residents will have to pay Goods and Services Tax (GST) at the rate of 18 per cent if their monthly maintenance charges or monthly contribution or monthly subscription to Resident Welfare Association (RWA) exceeds Rs 7,500.
Is there any exemption?
The Finance Ministry has clarified that the exemption from GST on maintenance charges charged by an RWA from residents is available only if such charges do not exceed Rs 7,500 per month.
Hence, it is clear from the Finance Ministry circular that flat owners will have to pay GST at 18 per cent if their monthly contribution to RWA exceeds Rs 7,500.
How to calculate the taxable amount?
According to the circular issued by Finance Ministry, if charges by a flat owner or resident crosses Rs 7,500 per month per member, the entire amount is taxable.
Finance Ministry has also cited an example to give more clarity on the order. Finance Ministry says if the maintenance charges are Rs 9,000 per month per member, GST at the rate of 18 per cent shall be payable on the entire amount of Rs 9,000 and not on (Rs 9,000-Rs 7,500) = Rs 1,500.
What if someone has two or more flats? How the tax liability would be calculated?
The Finance Ministry has said in such cases the ceiling of Rs 7500 per month per member shall be applied separately for each residential apartment owned by a particular person.
As per Finance Ministry's circular, "For example, 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 (Rs. 7500/- per month in respect of each residential apartment), the exemption from GST shall be available to each apartment."
What about Input Tax Credit (ITC) of GST? Can RWAs claim it?
In a further clarification, Finance Ministry has said that RWAs are entitled to take input tax credit (ITC) of Goods and Services Tax (GST) paid by them on capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes, other sanitary/hardware fillings etc.) and input services such as repair and maintenance services.