June 30, 2022
Note on Applicability of GST Law and Rules to Resident Welfare Associations (RWA)
A. Summary of GST law as applicable to RWAs ( Terms are as defined in Legends)
1. Obligation to Register and GST Classification: Any RWA having receipts of Aggregate Income of more than Rs. 20 Lacs in a Financial Year is obligated to register for GST. RWAs are to be registered under Classification Group 99959 – Sub Group - 999598 – Home Owners Associations.
2. Consequences of Non - Registration: Non-registration would attract severe penalties in addition to the obligation of RWAs to pay the GST with interest.
3. Consequences of Registration: Once RWA registers, it stays registered irrespective of subsequent change in the Aggregate Turnover.
4. Trigger of obligation of RWAs for payment GST: Where any RWA is registered and the Threshold Limit is exceeded in respect of an Apartment, RWA’s obligation to pay GST is triggered in respect of that Apartment (GST Chargeable Apartment)
5. GST Exempted Apartment: Any Apartment in a registered RWA in respect of which the Threshold Limit is not exceeded.
6. Threshold Limit: MMC (before Eligible Input Credit Discount as per Clause 11 below) charged to an Apartment of an amount which exceeds Rs. 7,500 per month (Threshold limit of Rs. 7,500 is stipulated by Serial number 77 of Notification No: 12/2017 – Central Tax (Rate) dated June 28, 2017).
7. GST Rate and Computation: GST @ 18% is required to be computed on the entire MMC right from Re.1.00 and not on the amount in excess of the the Threshold Limit which is charged to each GST Chargeable Apartment.
8. Aggregate Income: Aggregate of MMC, Other Charges and Other Income.
9. Common Electricity and Water Charges: Where billed to RWA by BESCOM or BWSSB are considered part of MMC.
10. Apartment specific Electricity and Water Charges: Where billed to the Apartment directly by BESCOM or BWSSB are not considered part of MMC.
11. Eligible Input Credit: RWA eligible to claim Input Credit of the GST paid on inputs pro rata to the extent of the GST paid on inputs as used in respect of all GST Chargeable Apartments only.
12. Eligible Input Credit Discount: RWA must pass on to each GST Chargeable Apartment, a discount of an amount equal to the pro rata share of the Eligible Input Credit so as to ensure that the aggregate GST collected by the RWA from all the GST Chargeable Apartments is equal to net GST paid by the RWA.
B. Legends
1. Act = Karnataka Goods and Services Act 2017.
2. Aggregate Income = Aggregate of MMC, Other Charges and Other Income
3. Member = Member of a RWA
4. MMC = Following monthly maintenance charges collected from a Member:
a) Sinking fund and repairs and maintenance fund.
b) Car parking charges and non- occupancy charges.
c) Simple interest for late payment.
d) Charges for maintenance and operation of common areas/facilities including DG sets.
e) Electricity and water charges paid for common areas.
f) Charges for water supplied to apartments without meters and paid for by the RWAs.
g) Property taxes paid for common areas.
h) Accounting, legal and any other types of consultancy services.
i) Common area painting charges.
5. Exempted MMC = Following MMC which is exempted from the GST levy:
a) Metered water and electricity charges supplied directly to individual apartment owners and paid by the RWA.
b) Property Tax and Water Tax , Non-Agricultural Tax, etc, which are collected under other statutes from individual apartment owners and paid by RWA.
6. Other Charges= following charges collected from either a Member or a resident:
a) Partly hall and club house rental charges
b) Guest fees and charges including club house trainers charges
c) Move in and move out charges
d) Membership transfer charges
e) Penal Interest on delayed payments.
f) Fines, penalties and damages.
7. Other Income = Other income from persons not being Members or residents and includes the incomes from short and long term common area rentals, advertisements, sponsorships and event managers, service providers like telecom companies, car cleaning agencies, etc. but excludes bank interest earned on deposits;
8. RWA = Residential Welfare Association.
FAQs on GST Provisions applicable to RWAs
C. What is the legal mandates for levy of GST on RWA?
1. Section 7 of the Act provides that the expression “ supply” includes, inter alia, all activities of supply of goods and services mentioned in Schedule II.
2. Entry 7 of Schedule II provides that supply of goods or services by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration would be considered as a supply of goods or services.
3. Section 2(17) ( e) of the Act defines “business” to , inter alia, include the provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members.
4. As per the Act, RWAs have been classified under Classification Group 99959 – Sub Group - 999598 – Home Owners Associations.
D. Is the levy of GST on RWA illegal on the grounds of mutuality?
1. Supreme Court in State of West Bengal vs Calcutta Club Limited had held on October 3, 2019 that levy of Service Tax on Clubs is illegal on the ground of mutuality.
2. However levy of GST on RWAs cannot be considered as illegal on same grounds as the Finance Bill 2020 retrospectively amended CGST Act watering down Supreme Court.
E. When are RWAs legally mandated to register under the Act?
1. Section 22 of the Act obligates a person whose aggregate turnover from supply of services exceeds Rs. 20 lakhs in any financial year to register under the Act.
2. Section 2 (6) of the Act defines “aggregate turnover” to means the aggregate value of all taxable supplies (excluding supplies subject to reverse charge) and exempt supplies.
3. RWAs are legally mandated to register under the Act only if it has an Aggregate Turnover exceeding Rs. 20 lakhs in any financial year and once RWA registers , it stays registered always , irrespective of subsequent change in the Aggregate Turnover.
F. When are RWAs legally mandated to levy GST on its members for MMC?
1. Serial number 77 of Notification No: 12/2017 – Central Tax ( Rate) dated June 28, 2017 stipulates a threshold limit of Rs. 7,500 per month (Threshold Limit).
2. Circular 109/28/2019-GST dated 22nd July 2019 ( Circular) clarifies that the Threshold Limit applies to each and every apartment separately even if any of those apartments are owned by the same Member.
3. RWAs are obligated to levy GST only if the RWA is obligated to register for GST in compliance with D(3) above and is required to recover from any of its Members MMC in excess of Threshold Limit ( Conditions).
4. Therefore RWAs are legally mandated to levy GST only if the Conditions are satisfied and not otherwise.
G. If MMC exceeds the Threshold Limit , on what amount GST is to be paid?
1. We recommend that RWAs levy GST on the entire amount of MMC right from Re.1.00 and not on the amount in excess thereof.
2. Our above recommendation is based upon the following analysis:
a) Fliers issued by the GST authorities, had initially specified that GST is required to be paid only on the amount of MMC in excess of the Threshold Limit.
b) However the Circular specified that GST is required to be paid only on the entire amount of MMC.
c) Consequently several advance ruling authorities also ruled in line with the Circular.
d) A single bench of the Madras High Court in the case of TVH Lumbini Square Owners Association had quashed the Circular.
e) However, the division bench of the Madras High Court had, in appeal, stayed the single bench order, continuing the uncertainty in the matter.
H. Are all the MMC collected to be included in the Threshold Limit? 1. FAQs on levy of GST on supply of services to RWAs in F.No.332/04/2017-TRU has clarified that all charges under MMC are to be included in the Threshold Limit.
2. FAQs have clarified that Exempted MMC are to be included in Threshold Limits.
I. Can the Eligible Input Credit Discount be considered for calculation of Threshold Limit, at an apartment level?
No, the Eligible Input Credit Discount as referred to in Clause N cannot be considered for calculation of Threshold Limit.
J. What is the due date for payment of GST to the government treasury?
1. RWAs may raise invoices either monthly or quarterly or annually, as per the decisions of their respective General Body or at the voluntary discretion of a Member when they are offered a discount for such up-front payment.
2. Whenever an invoice is raised by the RWA having a GST component then that GST component in the invoice is required to be paid to the government treasury within 20 days from the commencement of the immediately succeeding calendar month.
3. However, where a Member voluntarily pays monies to the RWA before an invoice is raised by the RWA the same constitutes an advanced payment by a Member on which no GST is payable until an invoice is raised and the advance is adjusted in which case GST becomes payable on the invoice so raised.
K. What are the legalities pertaining to levy of GST on Sinking Fund Contributions?
1. Characteristics of Sinking Fund Contributions ( SFC):
a) Periodically collected from members by RWAs.
b) Objective to meet future critical repair and replacement expenses.
c) Not meant to meet routine operational and day to day maintenance expenses.
d) Facilitates members to contribute in instalments to lessen financial burden.
2. Section 2(31) of the Act reads as under:
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply.
3. Against the above backdrop of SFC and with a view to mitigate the adverse implications of a needless mismatch of the GST input credits when SFC is collected, several RWAs had decided, based upon advise from tax counsels, that they would
a) Not include the SFC in the Threshold Limit and levy GST when collected.
b) Include the SFC in the Threshold Limit and levy GST only when utilized.
4. In support of the above interpretation few RWAs also implemented the following:
a) Assessed future critical repairs and replacements.
b) Estimated the monies required to meet the same ( Future Estimated Expenses).
c) Got the collection of Future Estimated Expenses approved by the General Body subject to the following conditions in relation to the SFC:
i. To be collected as a “ deposit” without any right to utilize the same.
ii. To be in fixed deposit in a bank until utilization.
iii. To be shown as “ Members Fund” in accounts and not as “ Liabilities”.
iv. Utilization of monies from SFC requires prior approval of the General Body.
v. Notes to accounts to specify year wise SFC collected , deposited and utilized.
5. The Advance Ruling Authority ( ARA) Karnataka in the case of Prestige South Ridge Apartment Owners Association dated September 17 2019 had also supported the above practice when they ruled that GST is not payable on the SFC.
6. However, the ARA Karnataka in the case of Olety Landmark Apartment Owners Association dated March 10, 2021 ruled that GST is payable on the SFC as the RWA had no Byelaw stating that unutilized amount of the SFC will be refunded to the members in the future and as such the SFC constitute advances and not “ deposits”.
7. The ARA Maharashtra in the case of Forest County Cooperative Housing Society Limited dated August 4, 2021 further ruled that the SFC must be included in the computation of the Threshold Limit.
8. Considering the uncertainly arising out of the above, we recommend RWAs taking a very conservative approach and include the SFC in the Threshold Limit and levy GST at the time of collection.
L. When is the RWA obligated to pay GST on a Reverse Charge Basis?
1. Section 2(98) of the Act defines “reverse charge’’ means the liability to pay tax by the recipient of supply of goods or services instead of the supplier under Section 9(3) or (4).
2. Applicability of Reverse Charge on purchase from specified suppliers
a) Section- 9(3) empowered the government to specify categories of supply of goods and services GST in respect of which is required to be paid on a reverse charge basis by the recipient of goods or services.
b) Of all services generally received by RWAs only legal services from lawyers and transportation of goods services from a goods transport agency have been specified in respect of which GST has to be paid by the RWA on a reverse charge basis.
3. Applicability of Reverse Charge on purchase from unregistered suppliers:
a) Section- 9(4) as amended and substituted with effect from February 1, 2019 has empowered the government to specify the class of registered persons who are obligated to pay GST on a reverse charge basis in respect of their purchases from unregistered suppliers.
b) The government has not specified RWA for this purpose and hence RWAs are not obligated to pay reverse charge on purchases from unregistered suppliers:
4.
RWAs receiving legal services from lawyers and transportation of goods services from a goods transport agencies , shall upon receipt of invoices from these service providers, make a payment of the GST on such invoices to the government treasury within 20 days from the commencement of the immediately succeeding calendar month.
M. What are the legalities for claiming GST input credit by GST registered buyer?
1. Section 16 of the Act entitles a GST registered buyer to take input credit of the GST charged on any supply of goods or services which are used or intended to be used in the course or furtherance of his business ( Supply) subject to the following conditions ( Conditions):
a) Buyer holds GST invoice or debit note in respect of the Supply.
b) Supplier has filed the GST invoice or debit note in Form GSTR-1.
c) Invoice or debit note filed in GSTR-1 appears in Buyer’s Form GSTR-2B.
d) Buyer has received the Supply.
e) Buyer has furnished the GST returns in Form GSTR- 3B.
f) If Supply is received in instalments or lots the last one is received.’
g) Buyer must pay towards the Supply with 180 days from invoice date.
h) Input credit not allowed on capital good if depreciation is claimed on GST.
i) Input credit is claimed for Supply is a financial year before earlier of following dates:
i. Due date for filing GST returns for September of the succeeding financial year.
ii. Date of filing annual returns in Form GSTR-9 for that financial year.
2. Sections 49 of the Act entitles the Buyer to use the input credit to be set off against payment of output GST by the GST registered buyer.
N. What are the legalities for claiming GST input credit by registered RWA?
1. RWAs sourcing goods and services for the maintenance and repairs of the residential premises and for matters related thereto ( Inputs) are entitled to , subject to the satisfaction of the Conditions, to take input credit of all the GST charged on all the Inputs received by the RWA ( Input Credit).
2. For the purpose of claiming Input Credit by RWAs, the Apartments of RWAs are required to be classified under the following two categories:
a) GST Chargeable Apartments: Apartments in a registered RWA in respect of which MMC in excess of the Threshold Limit is charged.
b) GST Exempted Apartments: Apartments in a registered RWA in respect of which MMC below the Threshold Limit is charged.
3. RWAs are eligible to claim Input Credit of the GST paid on Inputs pro rata to the extent of the GST paid on Inputs as used in respect of all GST Chargeable Apartments only (Eligible Input Credit).
4. RWA are also required to pass on to each GST Chargeable Apartment a discount of an amount equal to the pro rata share of the Eligible Input Credit so as to ensure that the aggregate GST collected by the RWA from all the GST Chargeable Apartments is equal to net GST payable by the RWA (Eligible Input Credit Discount).
O. What is the Rationale for passing of Eligible Input Credit Discount only to GST Chargeable Apartments?
1. RWA is liable to pay GST @ 18% only on that portion of the MMC which attracts GST which means only on that portion of the MMC collected from all the GST Chargeable Apartments put together (Aggregate GST Liability).
2. At the time of payment of the Aggregate GST Liability, RWA is also entitled to first set off the Eligible Input Credit and only the amount in excess of such set off has to be paid by the RWA is cash.
3. RWAs Aggregate GST liability is required to be borne pro rata only by the GST Chargeable Apartments.
4. Therefore, the Eligible Input Credit Discount is required to be passed only to GST Chargeable Apartments.
5. In respect of the GST Exempted Apartments the question of passing on Input Credit does not arise as in the first place there is no liability to pay GST on the charges levied on them.
P. What are the legalities of levy of GST on Other Charges/ Other Income ?
RWAs are legally mandated to levy GST on Other Charges and Other Income irrespective of the Threshold Limits.
June 30, 2022
Note on Applicability of GST Law and Rules to Resident Welfare Associations (RWA)
A. Summary of GST law as applicable to RWAs ( Terms are as defined in Legends)
1. Obligation to Register and GST Classification: Any RWA having receipts of Aggregate Income of more than Rs. 20 Lacs in a Financial Year is obligated to register for GST. RWAs are to be registered under Classification Group 99959 – Sub Group - 999598 – Home Owners Associations.
2. Consequences of Non - Registration: Non-registration would attract severe penalties in addition to the obligation of RWAs to pay the GST with interest.
3. Consequences of Registration: Once RWA registers, it stays registered irrespective of subsequent change in the Aggregate Turnover.
4. Trigger of obligation of RWAs for payment GST: Where any RWA is registered and the Threshold Limit is exceeded in respect of an Apartment, RWA’s obligation to pay GST is triggered in respect of that Apartment (GST Chargeable Apartment)
5. GST Exempted Apartment: Any Apartment in a registered RWA in respect of which the Threshold Limit is not exceeded.
6. Threshold Limit: MMC (before Eligible Input Credit Discount as per Clause 11 below) charged to an Apartment of an amount which exceeds Rs. 7,500 per month (Threshold limit of Rs. 7,500 is stipulated by Serial number 77 of Notification No: 12/2017 – Central Tax (Rate) dated June 28, 2017).
7. GST Rate and Computation: GST @ 18% is required to be computed on the entire MMC right from Re.1.00 and not on the amount in excess of the the Threshold Limit which is charged to each GST Chargeable Apartment.
8. Aggregate Income: Aggregate of MMC, Other Charges and Other Income.
9. Common Electricity and Water Charges: Where billed to RWA by BESCOM or BWSSB are considered part of MMC.
10. Apartment specific Electricity and Water Charges: Where billed to the Apartment directly by BESCOM or BWSSB are not considered part of MMC.
11. Eligible Input Credit: RWA eligible to claim Input Credit of the GST paid on inputs pro rata to the extent of the GST paid on inputs as used in respect of all GST Chargeable Apartments only.
12. Eligible Input Credit Discount: RWA must pass on to each GST Chargeable Apartment, a discount of an amount equal to the pro rata share of the Eligible Input Credit so as to ensure that the aggregate GST collected by the RWA from all the GST Chargeable Apartments is equal to net GST paid by the RWA.
B. Legends
1. Act = Karnataka Goods and Services Act 2017.
2. Aggregate Income = Aggregate of MMC, Other Charges and Other Income
3. Member = Member of a RWA
4. MMC = Following monthly maintenance charges collected from a Member:
a) Sinking fund and repairs and maintenance fund.
b) Car parking charges and non- occupancy charges.
c) Simple interest for late payment.
d) Charges for maintenance and operation of common areas/facilities including DG sets.
e) Electricity and water charges paid for common areas.
f) Charges for water supplied to apartments without meters and paid for by the RWAs.
g) Property taxes paid for common areas.
h) Accounting, legal and any other types of consultancy services.
i) Common area painting charges.
5. Exempted MMC = Following MMC which is exempted from the GST levy:
a) Metered water and electricity charges supplied directly to individual apartment owners and paid by the RWA.
b) Property Tax and Water Tax , Non-Agricultural Tax, etc, which are collected under other statutes from individual apartment owners and paid by RWA.
6. Other Charges= following charges collected from either a Member or a resident:
a) Partly hall and club house rental charges
b) Guest fees and charges including club house trainers charges
c) Move in and move out charges
d) Membership transfer charges
e) Penal Interest on delayed payments.
f) Fines, penalties and damages.
7. Other Income = Other income from persons not being Members or residents and includes the incomes from short and long term common area rentals, advertisements, sponsorships and event managers, service providers like telecom companies, car cleaning agencies, etc. but excludes bank interest earned on deposits;
8. RWA = Residential Welfare Association.
FAQs on GST Provisions applicable to RWAs
C. What is the legal mandates for levy of GST on RWA?
1. Section 7 of the Act provides that the expression “ supply” includes, inter alia, all activities of supply of goods and services mentioned in Schedule II.
2. Entry 7 of Schedule II provides that supply of goods or services by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration would be considered as a supply of goods or services.
3. Section 2(17) ( e) of the Act defines “business” to , inter alia, include the provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members.
4. As per the Act, RWAs have been classified under Classification Group 99959 – Sub Group - 999598 – Home Owners Associations.
D. Is the levy of GST on RWA illegal on the grounds of mutuality?
1. Supreme Court in State of West Bengal vs Calcutta Club Limited had held on October 3, 2019 that levy of Service Tax on Clubs is illegal on the ground of mutuality.
2. However levy of GST on RWAs cannot be considered as illegal on same grounds as the Finance Bill 2020 retrospectively amended CGST Act watering down Supreme Court.
E. When are RWAs legally mandated to register under the Act?
1. Section 22 of the Act obligates a person whose aggregate turnover from supply of services exceeds Rs. 20 lakhs in any financial year to register under the Act.
2. Section 2 (6) of the Act defines “aggregate turnover” to means the aggregate value of all taxable supplies (excluding supplies subject to reverse charge) and exempt supplies.
3. RWAs are legally mandated to register under the Act only if it has an Aggregate Turnover exceeding Rs. 20 lakhs in any financial year and once RWA registers , it stays registered always , irrespective of subsequent change in the Aggregate Turnover.
F. When are RWAs legally mandated to levy GST on its members for MMC?
1. Serial number 77 of Notification No: 12/2017 – Central Tax ( Rate) dated June 28, 2017 stipulates a threshold limit of Rs. 7,500 per month (Threshold Limit).
2. Circular 109/28/2019-GST dated 22nd July 2019 ( Circular) clarifies that the Threshold Limit applies to each and every apartment separately even if any of those apartments are owned by the same Member.
3. RWAs are obligated to levy GST only if the RWA is obligated to register for GST in compliance with D(3) above and is required to recover from any of its Members MMC in excess of Threshold Limit ( Conditions).
4. Therefore RWAs are legally mandated to levy GST only if the Conditions are satisfied and not otherwise.
G. If MMC exceeds the Threshold Limit , on what amount GST is to be paid?
1. We recommend that RWAs levy GST on the entire amount of MMC right from Re.1.00 and not on the amount in excess thereof.
2. Our above recommendation is based upon the following analysis:
a) Fliers issued by the GST authorities, had initially specified that GST is required to be paid only on the amount of MMC in excess of the Threshold Limit.
b) However the Circular specified that GST is required to be paid only on the entire amount of MMC.
c) Consequently several advance ruling authorities also ruled in line with the Circular.
d) A single bench of the Madras High Court in the case of TVH Lumbini Square Owners Association had quashed the Circular.
e) However, the division bench of the Madras High Court had, in appeal, stayed the single bench order, continuing the uncertainty in the matter.
H. Are all the MMC collected to be included in the Threshold Limit? 1. FAQs on levy of GST on supply of services to RWAs in F.No.332/04/2017-TRU has clarified that all charges under MMC are to be included in the Threshold Limit.
2. FAQs have clarified that Exempted MMC are to be included in Threshold Limits.
I. Can the Eligible Input Credit Discount be considered for calculation of Threshold Limit, at an apartment level?
No, the Eligible Input Credit Discount as referred to in Clause N cannot be considered for calculation of Threshold Limit.
J. What is the due date for payment of GST to the government treasury?
1. RWAs may raise invoices either monthly or quarterly or annually, as per the decisions of their respective General Body or at the voluntary discretion of a Member when they are offered a discount for such up-front payment.
2. Whenever an invoice is raised by the RWA having a GST component then that GST component in the invoice is required to be paid to the government treasury within 20 days from the commencement of the immediately succeeding calendar month.
3. However, where a Member voluntarily pays monies to the RWA before an invoice is raised by the RWA the same constitutes an advanced payment by a Member on which no GST is payable until an invoice is raised and the advance is adjusted in which case GST becomes payable on the invoice so raised.
K. What are the legalities pertaining to levy of GST on Sinking Fund Contributions?
1. Characteristics of Sinking Fund Contributions ( SFC):
a) Periodically collected from members by RWAs.
b) Objective to meet future critical repair and replacement expenses.
c) Not meant to meet routine operational and day to day maintenance expenses.
d) Facilitates members to contribute in instalments to lessen financial burden.
2. Section 2(31) of the Act reads as under:
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply.
3. Against the above backdrop of SFC and with a view to mitigate the adverse implications of a needless mismatch of the GST input credits when SFC is collected, several RWAs had decided, based upon advise from tax counsels, that they would
a) Not include the SFC in the Threshold Limit and levy GST when collected.
b) Include the SFC in the Threshold Limit and levy GST only when utilized.
4. In support of the above interpretation few RWAs also implemented the following:
a) Assessed future critical repairs and replacements.
b) Estimated the monies required to meet the same ( Future Estimated Expenses).
c) Got the collection of Future Estimated Expenses approved by the General Body subject to the following conditions in relation to the SFC:
i. To be collected as a “ deposit” without any right to utilize the same.
ii. To be in fixed deposit in a bank until utilization.
iii. To be shown as “ Members Fund” in accounts and not as “ Liabilities”.
iv. Utilization of monies from SFC requires prior approval of the General Body.
v. Notes to accounts to specify year wise SFC collected , deposited and utilized.
5. The Advance Ruling Authority ( ARA) Karnataka in the case of Prestige South Ridge Apartment Owners Association dated September 17 2019 had also supported the above practice when they ruled that GST is not payable on the SFC.
6. However, the ARA Karnataka in the case of Olety Landmark Apartment Owners Association dated March 10, 2021 ruled that GST is payable on the SFC as the RWA had no Byelaw stating that unutilized amount of the SFC will be refunded to the members in the future and as such the SFC constitute advances and not “ deposits”.
7. The ARA Maharashtra in the case of Forest County Cooperative Housing Society Limited dated August 4, 2021 further ruled that the SFC must be included in the computation of the Threshold Limit.
8. Considering the uncertainly arising out of the above, we recommend RWAs taking a very conservative approach and include the SFC in the Threshold Limit and levy GST at the time of collection.
L. When is the RWA obligated to pay GST on a Reverse Charge Basis?
1. Section 2(98) of the Act defines “reverse charge’’ means the liability to pay tax by the recipient of supply of goods or services instead of the supplier under Section 9(3) or (4).
2. Applicability of Reverse Charge on purchase from specified suppliers
a) Section- 9(3) empowered the government to specify categories of supply of goods and services GST in respect of which is required to be paid on a reverse charge basis by the recipient of goods or services.
b) Of all services generally received by RWAs only legal services from lawyers and transportation of goods services from a goods transport agency have been specified in respect of which GST has to be paid by the RWA on a reverse charge basis.
3. Applicability of Reverse Charge on purchase from unregistered suppliers:
a) Section- 9(4) as amended and substituted with effect from February 1, 2019 has empowered the government to specify the class of registered persons who are obligated to pay GST on a reverse charge basis in respect of their purchases from unregistered suppliers.
b) The government has not specified RWA for this purpose and hence RWAs are not obligated to pay reverse charge on purchases from unregistered suppliers:
4.
RWAs receiving legal services from lawyers and transportation of goods services from a goods transport agencies , shall upon receipt of invoices from these service providers, make a payment of the GST on such invoices to the government treasury within 20 days from the commencement of the immediately succeeding calendar month.
M. What are the legalities for claiming GST input credit by GST registered buyer?
1. Section 16 of the Act entitles a GST registered buyer to take input credit of the GST charged on any supply of goods or services which are used or intended to be used in the course or furtherance of his business ( Supply) subject to the following conditions ( Conditions):
a) Buyer holds GST invoice or debit note in respect of the Supply.
b) Supplier has filed the GST invoice or debit note in Form GSTR-1.
c) Invoice or debit note filed in GSTR-1 appears in Buyer’s Form GSTR-2B.
d) Buyer has received the Supply.
e) Buyer has furnished the GST returns in Form GSTR- 3B.
f) If Supply is received in instalments or lots the last one is received.’
g) Buyer must pay towards the Supply with 180 days from invoice date.
h) Input credit not allowed on capital good if depreciation is claimed on GST.
i) Input credit is claimed for Supply is a financial year before earlier of following dates:
i. Due date for filing GST returns for September of the succeeding financial year.
ii. Date of filing annual returns in Form GSTR-9 for that financial year.
2. Sections 49 of the Act entitles the Buyer to use the input credit to be set off against payment of output GST by the GST registered buyer.
N. What are the legalities for claiming GST input credit by registered RWA?
1. RWAs sourcing goods and services for the maintenance and repairs of the residential premises and for matters related thereto ( Inputs) are entitled to , subject to the satisfaction of the Conditions, to take input credit of all the GST charged on all the Inputs received by the RWA ( Input Credit).
2. For the purpose of claiming Input Credit by RWAs, the Apartments of RWAs are required to be classified under the following two categories:
a) GST Chargeable Apartments: Apartments in a registered RWA in respect of which MMC in excess of the Threshold Limit is charged.
b) GST Exempted Apartments: Apartments in a registered RWA in respect of which MMC below the Threshold Limit is charged.
3. RWAs are eligible to claim Input Credit of the GST paid on Inputs pro rata to the extent of the GST paid on Inputs as used in respect of all GST Chargeable Apartments only (Eligible Input Credit).
4. RWA are also required to pass on to each GST Chargeable Apartment a discount of an amount equal to the pro rata share of the Eligible Input Credit so as to ensure that the aggregate GST collected by the RWA from all the GST Chargeable Apartments is equal to net GST payable by the RWA (Eligible Input Credit Discount).
O. What is the Rationale for passing of Eligible Input Credit Discount only to GST Chargeable Apartments?
1. RWA is liable to pay GST @ 18% only on that portion of the MMC which attracts GST which means only on that portion of the MMC collected from all the GST Chargeable Apartments put together (Aggregate GST Liability).
2. At the time of payment of the Aggregate GST Liability, RWA is also entitled to first set off the Eligible Input Credit and only the amount in excess of such set off has to be paid by the RWA is cash.
3. RWAs Aggregate GST liability is required to be borne pro rata only by the GST Chargeable Apartments.
4. Therefore, the Eligible Input Credit Discount is required to be passed only to GST Chargeable Apartments.
5. In respect of the GST Exempted Apartments the question of passing on Input Credit does not arise as in the first place there is no liability to pay GST on the charges levied on them.
P. What are the legalities of levy of GST on Other Charges/ Other Income ?
RWAs are legally mandated to levy GST on Other Charges and Other Income irrespective of the Threshold Limits.
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