With increasing discombobulation of flat dwellers across the country, tax offices have issued explanations stating that Goods and Services Tax (GST) on maintenance payments is no added duty but existing since 2019 as a regulation.
This explanation is in reaction to increasing worries and disinformation going around on social media and in online neighborhood forums, where numerous residents have expressed shock and frustration over what they thought was an unforeseen new tax burden.
According to a report by NDTV Profit, the Central Board of Indirect Taxes and Customs (CBIC) brought about this regulation five years ago, stating that all flat owners who pay more than Rs 7,500 monthly to their Resident Welfare Association (RWA) are required to pay an 18% GST on the maintenance charges.
While this rule has been in place for a while, it has again been brought into focus by recent attempts by tax authorities to impose stricter compliance measures.
In 2021, though, a major ruling by the Madras High Court brought some relief. The court held that GST need only be charged on the amount of the maintenance fee that is above Rs 7,500, not the whole amount. This judgment overruled previous interpretations, including a 2019 CBIC circular and a ruling by the Authority for Advance Rulings (AAR), both of which had required taxing the entire maintenance fee if it exceeded the threshold.
Most importantly, the tax authority has not challenged this High Court decision, so it is still effective. Nevertheless, its enforcement can vary from state to state since certain state tax administrators may continue to apply the old interpretation.
For GST to apply, there are two requirements: the individual flat's monthly maintenance fee must be more than Rs 7,500, and the RWA's aggregate turnover in a year must be more than Rs 20 lakh. If both requirements are fulfilled, the housing society has to register under GST and charge tax on the due amount.
Although the longstanding regulation is there, most of the housing societies, especially in big cities, are not registered completely as per the regulation. The tax authority is now pushing RWAs for proper registration and tax collection so that penalties as well as potential legal trouble may be avoided.
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