How to Check GST on Your Flat Maintenance Charges?

Fed up by paying taxes on everything from groceries to gold; now add one more thing to your GST list: your flat maintenance, don’t worry. We are here to tell you everything related to the GST on flat maintenance charges.

Saving each penny of your salary and Buying a new home is everyone’s dream. But it’s not that easy or too difficult, but it comes with significant responsibilities. The documentation, exploring the options of a home, applying all the filters according to the priorities, perfect environment and surrounding and most importantly, the amenities etc., are all the things that come with purchasing a new home.

But just buying a new home is not the end; maintaining the one is the responsibility. Apart from light & water bills, and maid expenses, the permanent residents need to pay some monthly maintenance charges to the society, and it can come up with the GST. Did you ever imagine that? If not, there is time to gain new information about the same.

If you’ve already heard about the GST charges on flat maintenance, then the article helps you to know more about the conditions of when the GST is applicable on the maintenance charges of the flat.

Flat Maintenance Charges

A new home is a great responsibility and a vast one-time investment. It also has monthly investment commitments in the form of maintenance charges to a housing association. Maintenance charges are not only money for jams but also reasonable and legal. Every housing society has its maintenance charges based on the locality of the apartment, municipal areas, and metropolitan cities.

Most importantly it’s based on the housing society’s amenities. The amount of maintenance charges are calculated by the different methods societies use. For instance, some societies impose the charges based on per sq. ft of the flat owned by the residents or the rooms per flat like (1BHK,2BHK) etc.

Maintenance charges are significant and start from the day when the builder hands over the occupation rights to the respected owner of the property; similarly, the maintenance charges are also applicable to the tenant. The builder is responsible for the maintenance of the society till the committee is formed. When this is created, all the responsibilities related to the maintenance of society will be lies upon the committee.

Suppose you live in a cooperative society, the resident. It is responsible for contributing its share against the services they use or provide. The members of the society can choose their payment schedules and method in the society meetings.

Basis to Pay the Maintenance Charges

Flat maintenance charges vary from society and depend on the services provided by society. So, here are some reasons to know on what basis the flat maintenance charges had been imposed by the housing societies and these are as follows:

1: Repairing and the Services

The services related to the societies like security guards, housekeepers, gardeners, sweepers, elevator operators etc. The other charges include plumbing, electrical system, storage tanks, security systems, fire extinguishers etc.

Above the services are all the basic needs of everyone’s life, so the residents should pay equal charges to avail of the services.

2: Parking and Water Charges

Parking charges are only applicable for car and bike owners, and they can be different based on the space they have occupied and the type of Vehicle.

Water charges need to be paid by every tenant and resident, and they can be calculated by adding the number of total water pipelines and the average water use per flat.

3: Insurance and Sinking Fund

Governing body is to impose charges under the name of sinking funds for unexpected events, or it can be used as emergency funds, which can be 0.25 per cent of the total construction cost of each apartment.

Similarly, the insurance costs of the apartment are also included in the monthly maintenance charges. Still, the insurance cost of the commercial apartments and stores are exempted from the resident’s monthly maintenance charges.

4: Non-Occupancy Charges

Non-occupancy charges should be paid to the tenant even though they are not living in the apartment. But the charges should not be more than 10%.

5: Penalty on the Unpaid Dues

If the delay happens from the end of residents, a penalty can be added to the monthly maintenance charges, but it can only be 21% annually.

GST in Real Estate

GST (Goods Service Tax) hit the Indian economy in 2017 after the parliamentary majority passed the bill. As a coin has two sides, applying GST has the same reaction from ordinary people or citizens.GST comes as a direct and indirect tax with four slabs, and it ranges from 5% to 28% and is on everything the consumers use in the form of services.

In some senses, it was good because customers will be happy as they have to pay only one tax instead of four to five more taxes. But some customers thought more inclusive taxes were applicable than they had paid before the GST.

It’s not only about the GST applicable on the maintenance charges of flats, but there are other procedures too, where GST is applicable in real estate, and so there are some kinds of adverse effects faced by the real estate market. There is GST in all the procedures while purchasing a flat, which can be accepted as it’s all the legal or governmental work.

But why do customers pay the GST on their flat’s maintenance charges? To understand this go through the conditions of eligibility which are given below:

Check GST on Flat Maintenance Charges

Yes, a GST applies to the flat maintenance charges, but only when the monthly maintenance charges exceed some amount. According to the GST-AAR (GST authority for advance ruling), the GST will be levied on the total maintenance value, not the different values.

According to tax experts, it will be difficult for society to collect taxes from overseas residents. It will be more difficult when the GST is added, especially after the covid breakdown. Because there are a lot of financial ups and down face by the family, there might be difficulty in paying the GST amount with maintenance charges.

There is a lot of confusion for the buyers and the RWA ( Residential welfare association) as the Madras High Court was come up with the order and quashed the order of Tamilnadu Authority of application of GST charges on the Monthly Maintenance charges of Residents who have had paid Rs.7500 or above.

“Only over Rs 7,500 a month per member collected by the resident’s welfare associations (RWAs) is taxable under the GST Act”-Mumbai High Court.

Later, the Maharashtra GST AAR also states that the GST will be applicable on the monthly maintenance charges taken from the cooperative societies based on services they have provided that are not refundable. Just like repairing funds or sinking funds.

So the confusion starts between the taxpayers and the RWA, whether they have paid or levied taxes on the buyers. But the confusion ended with the decision that the decision of the Madras high court was only applicable to the buyers and housing societies which are located in the Madras State or under the jurisdiction of the Madra High Court and not to the Other States so that they could levy taxes on their own.

If the Buyers of other states have a problem paying GST on their monthly maintenance charges, they can also knock on the doors of the High Court of their Jurisdiction.

To Whom GST is Applicable?

Most of the time, buyers still don’t know about the GST charges, but it is essential from the buyer’s side to know the exact amount of the maintenance charges and how much the added GST will apply to his maintenance.

The housing societies that charge GST will comply with the finance ministry’s requirements, released in July 2019.

• 18% GST charges will apply for monthly maintenance charges above Rs.7500.
• The housing societies with annual turnover above 20 lakhs must comply with the GST charges.
• The housing societies with a yearly turnover of 20 lakhs or above must consider their electricity bills and property taxes the residents pay.
• Last but not least, even if the yearly turnover of the housing society exceeds the limit of 20 lakhs, their monthly maintenance charges are not above Rs.7500, and they are not eligible to pay GST charges or even if their turnover is above 20 lakhs. Still, those residents who do not have monthly maintenance charges of Rs.7500 are not liable to pay GST charges.
• For instance, those members who have paid Rs.9000 as their monthly maintenance charges will be eligible to pay 18% GST individually.

Courts Decision:

Similarly, the Government filed a petition and demanded the amendment on the ‘charge of taxes on the concept of mutuality’. The court’s decision is pending, and until then, the court has requested the buyers to trade cautiously. The decision of the AAR will apply to the applicant only and not to others, so the other taxpayers should pay their taxes.

Unless the taxpayer had filed a writ and got an order from the court, he needed to pay taxes respectively on the amount exceeding Rs.7500 per month.

In July 2020, the central board of indirect taxes and customs (CBIC) stated that housing societies would have to charge and collect the GST 18% on maintenance charges above Rs.7500 per month.

Later in November 2020, the AAAR (Appellate Authority for Advance Ruling) of Maharashtra came up with the decision that the co-operative housing societies that have a yearly turnover of Rs.20 lakhs or more and have had their monthly expenses of Rs.7500 and above then they should levy the GST Charges with 18%.

Impact on the Real Estate Market

The GST is the main reason for the higher prices of the property. The builders and developers have to pay much more taxes than anyone else.

Real Estate is the only market where builders and developers need to Pay GST on each development step, whether on raw materials, the construction cost, or the registration. They have to pay for it without any question. Also, they have to pay customs duty, VAT, Excise duty, service tax, and other legal fees. But these taxes are increasing the burden on the buyer’s shoulders.

The new GST regime lowers the buyer’s burden and increases the real estate tax to 12%. The council meeting in 2019 reduced the taxes for inexpensive housing development by about 1%, and for luxurious ones, it was about 5% of GST.

Conclusion

No matter what we buy today, we must pay GST on everything we have purchased, whether biscuits, diamonds, expensive cars, or house everything. Nothing is exempted from the GST regime, and common or middle-class people may not use the exempted things.

Some people still need to learn that there are GST charges on the home or flat’s monthly maintenance charges. As most people think the GST is only there to torture them financially, the same thinking applies here as the maintenance charges are high in some housing societies and the buyers need to pay the GST as an extra amount.

But yes, it does come with conditions, so people must have actual knowledge and information before judging or examining anything.

Flat maintenance charges have come with GST only when it exceeds the amount of Rs.7500, or the turnover of the housing society exceeds 20 lakhs.

Rember, we only pay extra charges for the things we have to use additional, or we use for our pleasure or our help.