With GST (Goods and Services Tax) rolling out July 1, there is a lot of hush-hush about the benefits arising out it, one segment that will surely treat it as a bane is society housing. Yes! Post-GST, if you opt to live in a gated society, you shall be required to pay more as compared to the current tax regime. Following are reasons why society housing will become a costly affair after July1:
Housing Societies with corpus over 20 Lakhs will be impacted
Housing Societies with an annual corpus over 20 lakhs shall require a mandatory registration under GST. No matter, if the annual maintenance charges per flat are less than Rs. 5000, if its annual collection exceeds Rs. 20 lakh, it will be under GST net. But, if this annual collection is between Rs. 20 lakhs to Ts. 75 lakh, the Cooperative Housing Society has discretion to opt for a composite scheme.
Hike in the cost of repair work
Any raw-material purchased on account of renovation work carried out in a housing society will grab a input-tax credit from the tax levied under GST but to avail such benefit, the Resident Welfare Association (RWA) has to utilize the full input tax credit as the funds set aside for repair will attract 18% GST.
Property tax is still on the way
While GST is rolling out, property tax still has not been subsumed by the government which implies that a property owner is continued to pay the property tax post-GST. Although no GST is applicable on the property tax thus there are no chances of double taxation.
Under GST, like maintenance charges, other utility bills as water supply charges needed to be accounted under the separate head. While electricity charges have been kept outside the preview of GST, other charges shall be maintained under the multiple heads to lower the balance maintenance so that the overall GST calculation can be lowered. Say, water charges is expected attract the concessional GST rate. As the Cooperative Housing Societies are not the suppliers of electricity and water, it will not attract GST but residents will continue to pay the tax as end-users.
Increased Maintenance Charges
As against 15.5% (Service Tax – 15%, Swachh Bharat Abhiyan – 0.05% and Education cess – 0.5%), courtesy GST, you shall be required to pay a tax @ 18%, if you incur maintenance charges in excess of Rs. 5000. Hence the residents living in society shall be burdened with an additional 2.45% of tax. Secondly GST runs on the Reverse Charge Mechanism (RCM) which states that the tax liability is vested with buyer not the seller. All the expenses including labour charges, security expenses,transportation charges, legal fees etc will aatract GST on RCM basis. However it is worth considering that Housing Societies are not business entities hence it requires serious rethinking on the part of government whether it should levy GST for the Cooperative Housing Societies With a billing exceeding Rs. 20 lakhs over the last previous year or not.