Monday, June 12, 2023

GST on Society Flats - Applicability and Exemptions

GST (Goods and Services Tax) is a crucial aspect that affects various sectors, including society apartments. As residents and managing committees navigate the complexities of GST regulations, it's essential to address common questions and provide clarity on its application. Let's delve into some frequently asked questions regarding GST on society flats and gain a better understanding of its implications.

Applicability of GST on Society Flats with Annual Turnover

One of the primary concerns for societies is whether GST applies if their monthly maintenance bill exceeds ₹7500, but the annual aggregate turnover remains below ₹20 lakh. The good news is that in such cases, GST does not apply. For instance, if a society has a monthly maintenance bill of ₹8000 but an annual turnover of ₹15 lakh, the society is exempt from GST.

GST Exemption for Commercial Use of Society Apartments

A common query revolves around the applicability of GST exemptions and turnover thresholds for society apartments used for commercial purposes. It's important to note that GST exemption and application apply to property used for commercial purposes as well. This means that even if a society apartment is utilized as a commercial office space and its monthly maintenance bill exceeds ₹7500, the exemption threshold still applies, and GST is not applicable.

Payment of GST to Outside Vendors

Societies often engage outside vendors for various services, raising questions about GST payment. Regardless of whether a society meets the exemption criteria, if the vendor's services fall under GST rules, the society has to pay GST as per the applicable percentage. For example, if a society hires a contractor for renovation work and the contractor charges ₹1 lakh for the project, the society needs to pay GST as per the applicable rate on the contractor's services.

GST Application for Multiple Apartments within the Same Society

In societies where multiple apartments are owned by an individual or group, it's crucial to understand how GST applies. If a person pays ₹5000 as a monthly maintenance bill for one flat and ₹8000 for another flat in the same society, GST applies only to the second apartment with a maintenance bill of ₹8000. The first apartment with a maintenance bill of ₹5000 remains exempt from GST.

Impact on Maintenance and Other Bill Formats

The introduction of GST has implications for maintenance and other bill formats in societies. It is
mandatory for societies to add GST to their monthly, quarterly, yearly invoices and mention the GSTIN (GST Identification Number) wherever applicable. For example, if a society charges ₹10,000 as monthly maintenance, the invoice should include GST separately, such as "Maintenance charges: ₹10,000 + GST
(18%): ₹1800."

Monthly Filing Forms for GST

Societies are required to file monthly GST forms to comply with the regulations. The relevant forms for
monthly filing are GSTR 1, GSTR 2, and GSTR 3. These forms help report the society's monthly sales, purchases, and overall GST liability, ensuring transparency and adherence to regulatory requirements.

Input Tax Credit on Repair and Maintenance Services

Societies incur expenses on various repair and maintenance services, and understanding the eligibility for Input Tax Credit (ITC) is crucial. Input Tax Credit is allowed on services such as lift Annual Maintenance Contracts (AMCs), housekeeping, security, fire AMCs, contracting staff, accounting, and auditing services, among others. For example, if a society pays ₹50,000 for lift AMC services, it can claim the Input Tax Credit on the GST paid for that particular service.

Inclusions and Exclusions while Calculating the ₹7500 Limit

When calculating the ₹7500 limit for GST applicability, certain items are to be excluded, while others
should be included. Exclusions include property tax, electricity charges collected from individual flat owners, and other statutory levies. On the other hand, inclusions comprise water/electricity charges for common areas and common services like clubhouse, swimming pool, parking charges, common property tax, payments for repair and maintenance, security charges, administrative expenses,
accounting charges, and non-occupancy charges.

Share Transfer Fees and Late Payment Interest in the ₹7500 Limit

Share transfer fees and interest on late payment raise questions regarding their inclusion in the ₹7500
limit. Share transfer fees are taxable but not included in the ₹7500 limit as they involve no third party. Similarly, interest on default is an individual charge, making it taxable but not covered under the limit of ₹7500.

Application of ₹7500 Threshold for Co-owned Flats

In cases where a flat is co-owned by multiple individuals, understanding the application of the ₹7500
threshold is essential. The ₹7500 threshold applies per flat, regardless of the number of owners. Each individual flat's maintenance bill needs to be considered separately to determine if GST is applicable.

Collection of GST from Members

Once a society's turnover exceeds ₹20 lakh and the monthly maintenance charges of individual members cross the ₹7500 limit, the society must collect GST. However, it is important to note that GST has to be collected only from those members whose monthly maintenance charges exceed ₹7500. Members with charges below this threshold remain exempt from GST.

By addressing these frequently asked questions, societies and residents can navigate the complexities of GST on society flats with greater clarity. It is advisable to consult with tax professionals or experts to ensure proper compliance with GST regulations and optimize the benefits available for societies and their members.