The GST exemption on maintenance charges paid to a housing society by a member is available only if it doesn’t exceed Rs 7,500 per month, the Authority for Advance Rulings (Tamil Nadu) has ruled. If the charges exceed the sum, the entire amount is taxable.
In its order, the AAR bench provides a numerical illustration. If the maintenance charges are Rs 9,000 per month per member, GST shall be payable on the entire amount of Rs 9,000 at the rate of 18%. It shall not be payable on the differential of Rs 1,500 (Rs 9,000 minus Rs 7,500). The ruling has been recently made public and is in sync with a clarification issued (after the order) by the finance ministry on July 22.
Further, tax experts point out that if the annual collection of a housing society is less than Rs 20 lakh, it does not have to register for GST. Thus, it will not have to collect and pay GST even if the monthly amount of maintenance charges exceeds Rs 7,500 per month per member. It should also be noted that prior to January 25, 2018, the exemption limit was lower at Rs 5,000 per month.
Maintenance charges are collected by a housing society for various purposes like providing security, lift maintenance, maintenance of common areas like a lobby, garden, club house, swimming pool, to name a few instances. These charges are typically a reimbursement for expenses incurred by the housing society against payments made to third parties.
In this case before the AAR, a Chennai housing society – TVH Lumbini Square Owners Association – contended that if individual contributions towards maintenance exceeds Rs 7,500 per month, GST is liable to be paid on the differential, which is only on charges over and above this sum. The AAR ruled otherwise.