GST on Apartments: Applicability and Compliance

Key Takeaways

• Under-construction apartments attract 1% GST for affordable housing or 5% GST for standard housing. Both rates apply without ITC.
• Completed apartments with an occupation certificate are exempt from GST.
• Land value is excluded from GST. One-third of the total property value is treated as land cost and deducted before applying the GST rate.
• RWA maintenance charges attract 18% GST only when both conditions are met. A member’s monthly contribution must exceed ₹7,500. The RWA’s annual turnover must also exceed ₹20 lakh.
• Once the ₹7,500 threshold is crossed, GST applies to the entire maintenance amount. It does not apply only to the amount above ₹7,500, as per CBIC Circular No. 109/28/2019-GST.
• The Madras High Court, in Greenwood Owners Association v. Union of India, has taken the opposite view. It held that only the excess should be taxed. However, CBIC’s circular remains the enforced position pending final resolution.
• Registered RWAs can claim Input Tax Credit on eligible maintenance-related expenses. These include security, housekeeping, and repairs.

GST on Apartment Purchase: Under-Construction vs. Completed

The property’s construction stage at the time of sale determines whether you pay GST. The price or location does not affect this factor.

Here’s how the two scenarios differ:

Under-Construction Apartments

• GST applies because the purchase is treated as a supply of construction service, not a finished good.
• 1% GST applies to affordable housing. The price must be up to ₹45 lakh, with a carpet area up to 60 sqm in metros or 90 sqm in non-metros. This applies without ITC.
• 5% GST applies to standard residential apartments outside the affordable category. This also applies without ITC.
• GST is calculated only on the construction value, excluding land. In practice, one-third of the total property value is treated as land cost and deducted before the rate is applied.

Completed Apartments

• No GST applies once an Occupation Certificate (OC) has been issued. The property is treated as a finished good rather than an ongoing service.
• Resale apartments are similarly exempt, regardless of price or size.

Example Calculation

Under-construction property priced at ₹60 lakh:

• Land value (one-third): ₹20 lakh, excluded from GST.
• Construction value (remaining two-thirds): ₹40 lakh.
• GST at 5% (standard housing): ₹40,00,000 × 5% = ₹2,00,000.

GST on Apartment Maintenance Charges (RWA/Housing Society)

Maintenance charges follow a separate rule from the property purchase itself. GST applies only when two thresholds are crossed.

Both conditions must be met for GST to apply:

• The RWA’s annual turnover exceeds ₹20 lakh.
• A member’s monthly contribution exceeds ₹7,500.

If either condition isn’t met, no GST applies to maintenance charges. This applies regardless of the other condition.

Once both thresholds are crossed, GST applies to the entire amount, not just the excess. This is confirmed under CBIC Circular No. 109/28/2019-GST, dated 22 July 2019.

Example Calculation

If an RWA charges ₹8,000 per month per member and both thresholds are crossed:

GST at 18% on the full ₹8,000 = ₹1,440 per member per month.

GST Registration for RWAs and Housing Societies

Not every RWA needs to register for GST. The rules differ depending on turnover and how maintenance is managed.

Here’s what applies in each scenario:

• Mandatory registration: Required once the RWA’s annual turnover from maintenance charges and other taxable services exceeds ₹20 lakh.
• Voluntary registration: RWAs below the threshold may still register voluntarily. This allows them to claim Input Tax Credit and pass the benefit on to residents.
• Builder-managed maintenance: If a builder collects maintenance charges before the RWA is formally handed over, the same ₹7,500 exemption doesn’t apply. The builder is liable for 18% GST on the full maintenance amount, regardless of the per-member threshold. This falls under a different service classification (SAC 995419).
• Return filing: Registered RWAs must file regular GST returns and remit collected tax. Missed deadlines attract penalties and interest.

Can RWAs Claim Input Tax Credit?

ITC eligibility is important because it affects how much of the GST burden passes on to residents. GST-registered RWAs can claim ITC on eligible expenses related to providing maintenance services to members.

• Eligible: Security services, housekeeping, gardening, repairs to common areas, and similar inputs used to provide taxable maintenance services.
• Effect: ITC offsets the GST paid on these inputs against the GST collected from members. This reduces the RWA’s net tax liability and, in principle, the burden passed on to residents.
• Documentation: Proper invoices from vendors and accurate GST filing are required to support any ITC claim.

Common GST Compliance Mistakes for Housing Societies

Most disputes between residents and their RWA over GST come down to a handful of recurring and avoidable errors. Here’s what to watch for:

• Charging GST below the threshold: Applying GST when a member’s monthly charge is ₹7,500 or less is a common error. The same applies when the RWA’s turnover is under ₹20 lakh.
• Taxing only the excess instead of the full amount: Based on the actual CBIC position, GST should apply to the entire amount once both thresholds are crossed. It should not apply only to the portion above ₹7,500.
• Not claiming eligible ITC: RWAs registered for GST often miss claiming credit on security, housekeeping, and repair expenses. This unnecessarily increases costs passed to residents.
• Missing return filing deadlines: Late GST returns attract penalties and interest. This adds avoidable costs to the society’s finances.
• Not registering when required: Some RWAs continue operating without registration even after crossing the ₹20 lakh turnover threshold. This risks penalties and back-dated tax demands.