Central Board of Indirect Taxes & Customs (“CBIC” or “Department”) received various representations regarding ambiguity in complying with provisions of Goods and Service Tax (“GST”) on monthly subscription received by Resident Welfare Association (“RWA”) or GST on RWA from its members.
Clarification on issues related to GST on RWA
Accordingly, CBIC issued circular No. 109/28/2019-GST dated 22nd July, 2019 to provide clarification on the following issues related to the monthly subscriptions being collected by RWA and how to charge GST on RWA.
1. Are the maintenance charges paid by residents to the RWA in a housing society exempt from GST and if yes, upto which amount such exemption is available?
- Supply of service by RWA to its own members shall be exempted upto INR 7,500 per month per member.
- RWA can be an unincorporated body or Non-profit entity registered under any law.
- Supply of service by RWA can be by way of reimbursement of charges or share of contribution and supply of goods for the common use of its members in a housing society or a residential complex.
- Please note that Prior to 25th January 2018, the exemption was available if the charges or share of contribution did not exceed Rs 5,000/- per month per member. However, such a limit has been was increased to Rs. 7,500/- per month per member with effect from 25th January 2018 vide notification No. 12/2018- Central Tax (Rate) dated 28.06.2019, increase in the RWA will lead to generation of GST on RWA.
2. If aggregate turnover of RWA is less than INR 20 Lacs, is it required to obtain registration under GST and pay GST on monthly subscription received of more than INR 7,500 per month per member?
- If aggregate turnover of RWA
is less than INR 20 Lacs, then it doesn’t required to obtain registration under
GST. Accordingly, no liability to pay GST arises even if maintenance charges
exceeds INR 7,500/- per month per member.
- However, if aggregate turnover of RWA is INR 20 lacs or more then it is required to be registered under GST. Further, RWA shall be liable to pay GST on monthly subscription of more than INR 7,500/- per month per member.
- Summary of availability of exemption on monthly subscription received by RWA is as follows:
3. Is the RWA entitled to take input tax credit of GST paid on input and services used for making supplies to its members and use such ITC for discharge of GST liability on such supplies where the amount charged for such supplies is more than Rs. 7,500/- per month per member?
- CBIC has clarified that RWAs
are entitled to take ITC of GST paid by them on followings:
- Capital goods (generators, water pumps, lawn furniture etc.),
- Goods (taps, pipes, other sanitary/hardware fillings etc.) and
- Input services such as repair and maintenance services.
4. Where a person owns two or more flats in the housing society or residential complex, whether the exemption limit of INR 7,500/- per month per member will applied per residential apartment or per person?
- Department has clarified in common parlance, when a person owns two or more apartments in a society or residential complex, he obtains membership for each and every apartment owned by him and accordingly, he is liable to pay subscription fee for each apartment.
- Therefore, exemption limits of INR 7,500/- shall be applied separately for each residential flat owned by him.
- E.g., If a person owns two apartments in a residential complex and he pays INR 7,500/- as monthly subscription for each flat. Then RWA shall be entitled to exemption of INR 7,500/- for both apartments.
5. How RWA should compute taxable turnover when the monthly subscription exceeds INR 7,500/-, i.e., is RWA liable to pay GST on amount exceeding INR 7,500/- or entire amount of INR 7,500/-?
- Exemption on monthly subscription shall be available only if amount received doesn’t exceeds INR 7,500/- per month per member.
- Accordingly, if amount exceeds INR 7,500/- , no exemption shall be available and RWA shall be liable to pay GST on entire amount.
- E.g., In the above mentioned case, RWA shall not be liable to pay GST on entire consideration of INR 15,000 (7,500*2). However, if in the given case, amount of subscription payable is INR 8,000/- per apartment then RWA shall be liable to pay GST on entire amount of INR 16,000 (8,000 * 2) not on net amount of INR 1,000/- (INR 16,000 – INR 15,000(7,500*2)).
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