maintanance charges

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 December 2009 a resident welfare association is getting Rs.1500000 p.a. but its monthly charge per member is less than Rs.3000.Whether it is liable to service tax or not?

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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09 December 2009 Not liable as exempted.

Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2009 exempted on what grounds

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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03 August 2024 As of the latest updates before the introduction of GST, the service tax implications for Resident Welfare Associations (RWAs) in India were subject to specific exemptions under the service tax laws. Here’s a detailed breakdown of whether maintenance charges collected by an RWA are liable to service tax or not:

### **Service Tax and Resident Welfare Associations (RWAs):**

1. **Service Tax Exemption for RWAs:**
- Under the Service Tax laws that were applicable before the GST regime, services provided by RWAs were generally exempt from service tax, provided certain conditions were met.

2. **Conditions for Exemption:**
- The exemption was available if the RWAs met the following conditions:
- **Charge per Member:** If the total charges collected from each member per month are below a certain threshold (Rs. 3,000 in your case), the service tax exemption applies. Specifically, if the monthly charges per member are less than Rs. 3,000, the association is typically exempt from service tax.
- **Type of Services:** The exemption generally covered services like maintenance of common areas, security, cleaning, etc., provided to the members of the association.

3. **Relevant Notifications:**
- The exemption was provided under various notifications and circulars issued by the CBEC (Central Board of Excise and Customs). For instance, Notification No. 25/2012-ST dated June 20, 2012, and subsequent amendments, provided an exemption to RWAs under certain conditions.

4. **Threshold Limits:**
- The exemption was based on the principle that if the maintenance charges collected from each member are below Rs. 3,000 per month, the association was not required to pay service tax on the maintenance charges.

### **Example Calculation:**

- **Total Maintenance Charges Collected Annually:** Rs. 15,00,000
- **Monthly Charges per Member:** Rs. 15,00,000 / 12 months = Rs. 1,25,000 per month (total), divided by the number of members.

If the total monthly charge per member is below Rs. 3,000, the RWA is typically exempt from paying service tax on the maintenance charges.

### **Transition to GST:**

- **GST Regime:** With the introduction of GST from July 1, 2017, the provisions related to service tax no longer apply. Under GST, specific provisions related to the taxation of services provided by RWAs were introduced. Under GST, the exemption threshold and applicability might differ, and it's advisable to refer to the latest GST notifications and rules to ensure compliance.

### **In Summary:**

- **Exemption Grounds:** Under service tax laws, an RWA was exempt from service tax if the monthly charges per member were less than Rs. 3,000, as per relevant notifications and circulars.
- **For GST:** Check the latest GST rules and notifications for updated provisions regarding RWAs and maintenance charges.

For current and precise details, especially if you are transitioning to or operating under GST, consulting with a tax advisor or legal expert is highly recommended to ensure compliance with the latest regulations.