Is 18% GST levied on maintenance amount when housing society is managed by builder?
Apr 22, 2025
Synopsis
GST on house maintenance is needed to be paid by those who are paying more than Rs 7,500 per month and the RWA's turnover is more than Rs 20 lakh (Rs 10 lakh in some states). But question is what if the RWA is yet to be formed and the builder is taking maintenance money. Do you still need to pay GST on this house maintenance money? Know more.
If you are living in a housing society, then you need to pay an amount of fee as maintenance for the upkeep of the buildings and common area. If the apartment is managed by RWA and Registered Society then then there is no requirement to pay Goods and Services Tax (GST) on maintenance fee by the residents if monthly amount is below the specified threshold. However, in many housing societies it takes time for RWA or Registered Society to be formed and in this situation, GST is applicable if the housing society is still managed by the builder. How much will GST be charged and who will pay it is the question.
Let us understand in detail how GST will be applied in different scenarios depending upon the amount of maintenance and who is managing the housing society.
When is GST to be paid by homeowners for paying maintenance to housing society or RWA?
It is only if the RWA or housing society’s aggregate turnover is over Rs 20 lakh (10 lakh in few states) and you pay a maintenance amount of more than Rs 7,500 per month per unit of the flat, then you need to pay GST on such maintenance amount. Both conditions (20 lakh and more than Rs 7500) must be satisfied together, for levying GST on maintenance expenses.
Sanjay Chhabria, Indirect Tax Lead, Nexdigm, says “If individual contribution per member per month is Rs 7500 or less, no GST is charged even if the society is GST registered. The exemption under Notification No. 12/2017 – Central Tax (Rate) applies.”
GST on maintenance amount is charged for the full amount and not the amount above Rs 7,500
Chartered Accountant Bimal Jain, founder, A2Z Taxcorp LLP highlights an important point for those who need to pay GST on maintenance amount. Jain says: “In cases where the maintenance charges exceed Rs 7500 per month per member, then, the entire amount is taxable.”
For example, if the maintenance charges are Rs 9000 per month per member, GST at 18% rate shall be payable on the entire amount of Rs 9000 and not on [Rs. 9000 - Rs. 7500] = Rs 1500, as clarified vide Circular No.109/28/2019- GST, dated. 22 July 2019.
Jain says “CBIC should further provide relaxation and clarify that GST is to be levied only on Rs 1,500 per month per member and not on the full Rs 9,000, as this will provide much needed relief and avoid any litigation on this point.”
Do you need to pay GST on maintenance even if the builder is collecting it?
To answer the question of when, if at all, GST is required to be paid when the builder is collecting the maintenance charges, you need to first understand why this situation is happening. Experts say this situation can happen if either the RWA/housing society is not yet formed, or the RWA/housing society has done a deal with the builder.
The GST determining factor when maintenance is paid to builder
Legal experts say the determining factor which checks whether you need to pay GST on maintenance charges paid to the builder is whether any contract exists between the builder, RWA and the homeowners which specifies who is the supplier of this service– builder or RWA. If its builder then GST can be required to be paid, but if its RWA then the GST exemption clause will apply (Rs 7,500 and Rs 20 lakh).
Shivam Mehta, Executive Partner, Lakshmikumaran and Sridharan Attorneys, says: “Typically, the builder collects the maintenance amount on behalf of RWA only and acts as a conduit or facilitator for collection and disbursement of funds. Thus, even though the builder has assumed the responsibility for maintenance, the contractual arrangement between RWA, Builder and member must be examined to determine the supplier and accordingly, the taxability of services.”
We have spoken with various legal experts about this and here’s what they said:
Situation 1: Builder has responsibility for apartment’s maintenance but there exists an RWA
Chhabria says if the builder provides maintenance service (on behalf of RWA), it is considered a supply of service by the builder to the RWA. “Therefore, this would be an input service received by the RWA on which the builder would have already charged GST. Thus, the maintenance bill issued by the builder to the RWA would include this GST implication.”
Chhabria further adds that if the RWA divides these expenses amongst its members as a pass through (which may be called by any name), and if this recovery from the individual member per flat per month exceeds Rs 7,500 and the aggregate income of the RWA exceeds Rs 20 lakh (Rs 10 lakh in few states), then the RWA would still be liable to obtain GST registration and start charging GST on maintenance recoveries from its individual members.
Situation 2: There is no RWA and the Builder has responsibility for apartment’s maintenance
Experts say that in absence of RWA for a society, the builder responsible for maintenance of the society is liable to fulfil the requisite GST compliances. “The builder will charge GST on the maintenance amount collected from residents,” says Manmeet Kaur, Partner at Karanjawala & Co.
Chartered Accountant Siddharth Surana explains that if the builder has taken responsibility for maintenance instead of the RWA (Residential Welfare Association) or society in simpler words, it would be the said builder who would be liable for payment of GST on the maintenance charges collected from the flat-owners.
“In a way, it would be construed as outward supplies and correspondingly, the amount collected by the builder would be considered as the turnover of the builder and not that of the society. This typically happens in situations where the society is not yet formed for the building,” says Surana.
Builder may not be eligible for GST exemption so even if Re 1 is paid to it, it would be liable for GST
Mehta from Lakshmikumaran and Sridharan Attorneys say regarding the applicability of GST exemption notification, the said notification exempt service by unincorporated body or a non- profit entity registered under any law which may not cover Builder.
Chhabria agrees with Mehta and says: “The GST exemption will not be available if the builder directly bills the members even if the maintenance cost is below Rs 7500 as the exemption is only applicable to services provided by an unincorporated body or a non-profit entity only.”
Anand Parasrampuria, Associate Partner, Dhruva Advisors LLP agrees with Mehta and Chhabria and adds: “The exemption from GST is available only in case the services are provided by Co-operative Housing Society to its members and the maintenance charges do not exceed Rs 7500 per month per member. Accordingly, in case the builder has taken the responsibility for maintenance, instead of a society or RWA, then the aforesaid GST exemption is not applicable, and builder is liable to pay GST at 18% rate on maintenance amount recovered from the apartment owners, even if the maintenance amount does not exceed Rs 7500 per month per member.”
Jain disagrees with all of the experts quoted above and says: “If the builder has assumed responsibility for accepting monthly maintenance and there is no RWA/housing society then the builder can start charging 18% GST on the maintenance amounts above Rs 7,500 per month per member. If the maintenance amount in such cases is less than Rs 7,500 per month per member, then no GST is to be levied by the builder.”
Builder can’t charge GST without updating its GST registration with SAC code 995419
The builder needs to update its GST registration if it is accepting maintenance money from homebuyers. Jain says: “There can be a situation where the RWA is yet to be formed, and the builder has assumed responsibility for accepting monthly maintenance money for repair and maintenance of the building. So, in this case the builder needs to update their GST registration with SAC code 995419 for “Services involving repair, alterations, additions, replacements, renovation, maintenance or remodeling of the buildings”
[The Economic Times]
