Issue regarding ST liability on Maintenance charges paid by the flat
owners.
There is one circular issued by Dept. which provides explanation on taxability of
maintenance charges ie. monthly contribution collected from members used by the
RWA(Resident Welfare Association) for the purpose of making payments to the third parties,
in respect of commonly used services or goods [Example: for providing security service for
the residential complex, maintenance or upkeep of common area and common facilities like
lift, water sump, health and fitness centre, swimming pool, payment of electricity Bill for the
common area and lift, etc.].
Exemption at Sl. No. 28 (c) in notification No. 25/2012-ST is provided specifically with
reference to service provided by an unincorporated body (SAGAR-But not an
unestablished body) or a non–profit entity registered under any law for the time being
in force such as RWAs, to its own members.
However, a monetary ceiling has been prescribed for this exemption, which is 5,000 rupees
per month per member contribution to the RWA, for sourcing of goods or services from
third person for the common use of its members.
If per month per member contribution of any or some members of a RWA exceeds 5,000
rupees, the entire contribution of such members whose per month contribution exceeds five
thousand rupees would be ineligible for the exemption under the said notification. Service tax
would then be leviable on the aggregate amount of monthly contribution of such members. In
our client's case nobody's monthly maintenance exceeds 5,000 rupees per month.
Whether the maintenance charges received by Proposed Co-op Hsg. Soc. Ltd. from its
members shall be eligible for exemption?
The answer is yes, the law provides exemption to RWA but nowhere it is mentioned
Proposed Co-op Soc. shall be eligible for exemption or even Developer shall be eligible for
exemption in the first year. So only if the Co-op Hsg. Soc is already established it shall be
eligible otherwise a proposed co-op. society may not get the exemption.
I had confirmed with the sales team the process of formation is under way but it is not
The society needs to maintain separate books of Accounts. If separate books are maintained
we need to show the receipts from flat owners in those books.
Thus, the issue requires further clarity from the Developers as well as department for further
action.
I can only hope for the best otherwise Dept. is not ready to leave ST on peoples maintenance
charges.
owners.
There is one circular issued by Dept. which provides explanation on taxability of
maintenance charges ie. monthly contribution collected from members used by the
RWA(Resident Welfare Association) for the purpose of making payments to the third parties,
in respect of commonly used services or goods [Example: for providing security service for
the residential complex, maintenance or upkeep of common area and common facilities like
lift, water sump, health and fitness centre, swimming pool, payment of electricity Bill for the
common area and lift, etc.].
Exemption at Sl. No. 28 (c) in notification No. 25/2012-ST is provided specifically with
reference to service provided by an unincorporated body (SAGAR-But not an
unestablished body) or a non–profit entity registered under any law for the time being
in force such as RWAs, to its own members.
However, a monetary ceiling has been prescribed for this exemption, which is 5,000 rupees
per month per member contribution to the RWA, for sourcing of goods or services from
third person for the common use of its members.
If per month per member contribution of any or some members of a RWA exceeds 5,000
rupees, the entire contribution of such members whose per month contribution exceeds five
thousand rupees would be ineligible for the exemption under the said notification. Service tax
would then be leviable on the aggregate amount of monthly contribution of such members. In
our client's case nobody's monthly maintenance exceeds 5,000 rupees per month.
Whether the maintenance charges received by Proposed Co-op Hsg. Soc. Ltd. from its
members shall be eligible for exemption?
The answer is yes, the law provides exemption to RWA but nowhere it is mentioned
Proposed Co-op Soc. shall be eligible for exemption or even Developer shall be eligible for
exemption in the first year. So only if the Co-op Hsg. Soc is already established it shall be
eligible otherwise a proposed co-op. society may not get the exemption.
I had confirmed with the sales team the process of formation is under way but it is not
The society needs to maintain separate books of Accounts. If separate books are maintained
we need to show the receipts from flat owners in those books.
Thus, the issue requires further clarity from the Developers as well as department for further
action.
I can only hope for the best otherwise Dept. is not ready to leave ST on peoples maintenance
charges.
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