• GST in Apartment Complex managed by the builder

Our apartment complex, Purvanchal Royal Park , Sector 137 NOIDA is maintained by the builder. The possession of this complex was given in 2014. 
 -The maintenance is done by the builder through its company purvanchal projects private ltd. 
-The builder charges INR 1.95 per square feet for the maintenance Plus applicable Taxes
- Apartment sizes are 1315 sq ft, 1735 sqft, 1950 sqft and 2350 sqft
-Club house charges are separate at about 10000 rs per annum irrespective of the apartment size
-Total number of apartments are 1140
- An elected Board of Management of the Apartment Owner's association exists and is registered as per the provisions of the UP Apartment Owners bye laws
-The Board of Management of Apartment Owner's association is not involved in the maintenance of the complex as yet
-No contract of maintaining the complex, exists between the builder and the Apartment Owner Associations elected body
-At the time of possession, the builder had a short maintenance contract signed between the builder and the residents outlining the terms of the maintenance, rates etc.
-The builder always charged 15% service tax prior to GST , in addition to the base charges shared above 
-Recently the builder has raised an additional demand for( 3% ) the differentiathe residents of paying l in the taxes from 15% service tax to 18% 

Now the Questions:
1. In your experience, do you recommend  the Apartment Owners association having a maintenance contract with the builder?
2. Does outsourcing the activities of maintenance of the complex by doing point # 1 relieve residents from paying the GST?
3.  In the current scenario, in any case, is GST @ 18% applicable and paid by the individual flat owners to the builder in turn to be paid to the government?
Asked 7 years ago in Civil Law

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5 Answers

1. Generally, once the builder hands over the management of the apartment and it's maintenance to the RWA, he(builder) withdraws from the project completely and the entire responsibility of ensuring the upkeep, maintenance and security of the building devolves upon the RWA which deploys it's own men, machinery and agency to do the relevant jobs.

2. No GST has to be paid, irrespective the fact that who's the agency responsible for maintenance and upkeep of the society.

Vibhanshu Srivastava
Advocate, Lucknow
9659 Answers
307 Consultations

1) cancel the maintenance contract with builder. Association should carry on the maintenance . the outgoings would reduce considerably

2)GST is applicable and has to be paid by residents if maintenance payable is more than Rs 5000 per month

Ajay Sethi
Advocate, Mumbai
96769 Answers
7805 Consultations

if the maintenance charges are less then Rs 5000 per month builder cannot charge GST from residents

2)however if total collection are more then Rs 20 lakhs per annum GST would be applicable

3) please note that payment of property taxes, water taxes are excluded from GST

4) out sourcing maintenance activities would not exclude residents from payment of GST if maintenance charges are more than Rs 5000 per month

Ajay Sethi
Advocate, Mumbai
96769 Answers
7805 Consultations

Recently a clarification issued by the Finance Ministry reiterated that the supply of service by RWA, unincorporated body or a registered non- profit entity, to its own members by way of reimbursement of charges up to an amount of five thousand rupees per month per member for providing services and goods for the common use of its members in a housing society or a residential complex are exempt from GST. RWAs will have to pay GST on monthly contributions over than Rs. 5000 per member and if the annual turnover of RWA is over Rs. 20 lakhs.

2) terminate contract with builder . it your maintenance charges are less than Rs 5000 then no GST would be payable

Ajay Sethi
Advocate, Mumbai
96769 Answers
7805 Consultations

1. The RWA has to take over the maintenance subject from the builder and has to make its own arrangement for maintenance of the apartments through its sources. This decision is to be taken through a general body meeting wherein all the other aspects are to be decided including the applicable maintenance and whether to charge the service tax or the GST or not etc.

2. If the Residents welfare association takes over the maintenance from the builder then the applicability of the GST may not be necessary.

3. Is your worry about the GST payment or the maintenance aspect to be transferred from builder to the RWA?

Whether it is going to the government or not, if an arrangement is with the RWA then this burden may be reduced.

T Kalaiselvan
Advocate, Vellore
86968 Answers
2334 Consultations

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