Do You Need to Pay 18% GST on Maintenance Charges if the Builder Is Managing the Housing Society?

If your housing society is still managed by the builder and not a formal Resident Welfare Association (RWA), you might be wondering whether Goods and Services Tax (GST) applies to your monthly maintenance charges. It’s a valid concern, especially as tax scrutiny in this area grows. 

Here’s a breakdown of when GST applies, who needs to pay it, and what changes based on who’s managing your society.

When Is GST Applicable on Maintenance Charges?

GST at 18% is levied if both the following conditions are met:

• Your monthly maintenance fee exceeds ₹7,500 per flat, and

• The annual turnover of the RWA exceeds ₹20 lakh (or ₹10 lakh in special category states).

If either of these conditions is not satisfied, the maintenance is exempt from GST under Notification No. 12/2017 – Central Tax (Rate). If GST is applicable, it’s charged on the entire amount, not just the amount exceeding ₹7,500.

For example, if you pay ₹9,000 monthly, GST is applied to the full ₹9,000, not just ₹1,500.

Scenario 1: RWA Exists, Builder Collects on Its Behalf

In many societies, the builder continues to manage maintenance even after the RWA is formed. In such cases:

• The builder acts as a facilitator, collecting money on behalf of the RWA.

• The RWA is the service provider, and if the exemption criteria are met (₹7,500 per month & ₹20 lakh turnover), no GST is charged to residents.

• If GST is applicable, it is billed by the RWA, not the builder, even if collected via the builder.

Scenario 2: No RWA Formed, Builder Directly Handles Maintenance

If an RWA or registered society hasn’t been set up yet, and the builder handles all maintenance services:

• The builder becomes the supplier of services.

• In this case, GST at 18% is applicable on the full maintenance amount, regardless of the ₹7,500 threshold.

• Builders do not qualify for the exemption meant for RWAs or co-operative societies.

Even if the builder charges just ₹1,000, GST may still be applicable because the builder is considered a taxable entity under GST law.

Scenario 3: Contractual Clarity Between Builder, RWA, and Residents

If there’s a contract in place stating that the builder is only collecting funds for the RWA, and not actually providing the maintenance services, then the RWA is considered the actual service provider. This can help qualify for the GST exemption, if both exemption conditions are met.

Legal experts stress that clarity in the contractual arrangement is crucial to determine who is responsible for GST.

GST Code Requirement for Builders

If the builder collects maintenance charges, it must:

• Update its GST registration with SAC Code 995419, which is for “Services involving repair, alterations, additions, replacements, renovation, maintenance or remodelling of the buildings”.

Without this update, builders may not legally be able to charge GST for such services.

Who Pays GST Depends on Who Manages the Society

Whether or not GST applies to your maintenance charges depends on:

• Who is providing the maintenance service (Builder or RWA).

• How much you pay monthly.

• Annual turnover of the managing body.

If your builder is still managing the property and there’s no formal RWA, expect to pay 18% GST on the full maintenance amount, unless regulatory updates say otherwise.

To avoid complications, residents should clarify the arrangement in writing, and ensure their society transitions to an RWA setup as early as possible.

Read More: GST on UPI Over ₹2,000? Here’s What You Need to Know. 

Conclusion

Whether or not you’re liable to pay 18% GST on your housing maintenance charges hinges entirely on who manages your society and how the service is structured. Being proactive now can save you from GST complications later.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.