Residents’ bodies in GST net

Residents’ Welfare Associations (RWAs) of high- rise apartment complexes or gated communities are being forced to rework their maintenance strategies in the city, since the monthly maintenance charges of above Rs 5,000 per household (or sum exceeding Rs 20 lakh and above per annum for the complex), come under the Goods and Services Tax (GST) regimen. 

Notification No 12 of the Goods & Services Tax (GST) says, “Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution: (a) as a trade union; (b) for the provision of carrying out any activity which is exempt from the levy of Goods and Services Tax; or (c) up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex.” 

Residents of Old Mahabalipuram Road (OMR) are unhappy at the 18 per cent GST that is being levied on RWAs, as half of the maintenance costs go towards water supply and sewage disposal. Harsha Koda, Secretary of Sabari Terrace, which has 56 apartments, said, “We collect around Rs 4.5 to 5 lakh per month. Nearly Rs 2.5 lakh goes towards water supply, sewage disposal and electricity. Basically, when compared to a home in the city, our maintenance charge is double, since we have to pay for water supply and sewage, which are essential services supplied to residents living in other localities. We are compelled to have a higher maintenance because the government is not providing these services. There should be a special status given to such cases.” 

Koda, who is also the Coordinator of Federation of OMR Residents Associations (FOMRRA), said that they are planning to appeal to the GST Council to make allowances on a case-to-case basis, rather than follow a fixed rate across the country. “You cannot equate Rs 5,000 on a national basis, since maintenance differs between metros and tier-2 cities. We plan to make a representation to the Prime Minister’s Office and Finance Ministry stating that RWAs should be considered as a modern version of the great Indian tradition of a joint family, living under one roof. The whole idea of a family being taxed is unfair,” he explained. 

With approximately three lakh homes on OMR, the residents are coming together to protest this taxation. “We will register with the GST but our protest is serious. We are paying the tax in protest and will keep raising it with the government every single time,” added Harsha. 

Many of the apartment complexes have outsourced security, maintenance and engineering services, housekeeping, gardening and other such tasks to private organisations. Experts say that input tax credit (ITC) can be claimed for GST paid on such services.

RWAs in other parts of the city too are in a quandary. Ganga Sridhar, software professional and office-bearer of Raja Street Residents Welfare Association, said, “Our apartment outsources maintenance of lifts and security. With the GST levied on these services, our maintenance may go up to Rs 5,000. However, since we are just six apartments, we will try keeping it below the threshold level, to ensure that we don’t fall under the GST bracket.” 

Members of RWA are finding it tough to convince the households to pay the GST. Krishnaraj, Treasurer, Villa Elysian Residents Welfare Association in ECR, said that this has to be endured. “We are a relatively new association, with around 50 villas. The maintenance cost is Rs 1.8 per sq ft of land and the average villa size is 4,500 sq feet. This cost includes salaries for security, gardeners, in-house plumbers and managers, support staff, diesel for the generator and electricity for the common area. Personally, since GST is new to us, we are getting affected as we are paying 18 per cent. But on the association side, we have to pay tax (and can claim ITC) for these extra services, which come under the luxury bracket. Even if we buy a bottle of mineral water, we pay GST. We have no choice but to endure it,” he said, adding that people will get used to this system too. 

Kannan D, Sr Manager, D Arvind & Associates LLP, Chartered Accountants, said that normally, one must register with GST. “However, if the total amount collected in a year is less than Rs 20 lakh, then, there is no question of payment of GST. Only if the amount exceeds Rs 20 lakh, the question of payment of GST will arise. Also, we have to check whether it can be interpreted in a way to assume that for any service or goods received, the association need not pay GST up to an amount of Rs 5,000 for each member put together. We need more time to study the various angles,” said the expert.