Maintenance Charges under GST Regime
Mar 07, 2018 Real Estate News
The Goods and Services Tax (GST) regime came into existence in 2017. It simplified the entire tax regime by simplifying multiple taxes such as service tax and value added taxes resulting in simplifying the home buying process as well. However, the monthly maintenance charges got an increase which left the owners of the flats residing in the housing societies unhappy and discontent.
Although the new tax regime eliminated the multiple taxation systems but increased the maintenance cost in the housing societies which did not go well with several flat owners and Resident Welfare Associations (RWAs). As per the GST, the maintenance charges got increased to 18 percent slab from the earlier rate of 15.55 percent which is an increase of about 2.5 percent.
Here are some facts about the maintenance charges under GST:
• The criteria for paying this tax was that the annual balance of the total maintenance charges levied by housing societies should exceed Rs 20 lakh that means Rs 5000 every month excluding the utility bills, property tax or stamp duty.
• For this purpose, the housing societies were supposed to get themselves registered under GST.
• In a housing society, smaller properties whose monthly bills do not go beyond Rs 5000 are not required to pay the charges whereas the bigger apartments in the same complex with higher monthly bills are required to pay GST.
• The system of maintenance charges existed during the service tax regime which included the services and not the goods. But the as per the new GST system, it has included the newer societies and includes taxes on goods purchased as well.
• GST will not be levied on the services provided by the local authorities or government to persons other than business entities.
• According to the GST council, the exemptions for service tax will be continued for the services offered under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY).
In a bid to defend its decision, the government added that the input credit tax availed by the societies will act as an added advantage for RWAs while reducing their burden. The input tax credit will be applicable to the various supplies received by the society that includes security services or payment of audit fees. While paying the output tax to the government, the housing societies can deduct the input tax that has been already paid to the vendors.
However, according to the FAQs formed by the Tax Research Unit, Ministry of Finance (MoF) car parking charges, repair and maintenance charges, non-occupancy charges, or simple interest for late payment of dues owed to the housing societies will continue to attract GST
Although the new tax regime eliminated the multiple taxation systems but increased the maintenance cost in the housing societies which did not go well with several flat owners and Resident Welfare Associations (RWAs). As per the GST, the maintenance charges got increased to 18 percent slab from the earlier rate of 15.55 percent which is an increase of about 2.5 percent.
Here are some facts about the maintenance charges under GST:
• The criteria for paying this tax was that the annual balance of the total maintenance charges levied by housing societies should exceed Rs 20 lakh that means Rs 5000 every month excluding the utility bills, property tax or stamp duty.
• For this purpose, the housing societies were supposed to get themselves registered under GST.
• In a housing society, smaller properties whose monthly bills do not go beyond Rs 5000 are not required to pay the charges whereas the bigger apartments in the same complex with higher monthly bills are required to pay GST.
• The system of maintenance charges existed during the service tax regime which included the services and not the goods. But the as per the new GST system, it has included the newer societies and includes taxes on goods purchased as well.
• GST will not be levied on the services provided by the local authorities or government to persons other than business entities.
• According to the GST council, the exemptions for service tax will be continued for the services offered under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY).
In a bid to defend its decision, the government added that the input credit tax availed by the societies will act as an added advantage for RWAs while reducing their burden. The input tax credit will be applicable to the various supplies received by the society that includes security services or payment of audit fees. While paying the output tax to the government, the housing societies can deduct the input tax that has been already paid to the vendors.
However, according to the FAQs formed by the Tax Research Unit, Ministry of Finance (MoF) car parking charges, repair and maintenance charges, non-occupancy charges, or simple interest for late payment of dues owed to the housing societies will continue to attract GST
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