AAR Classifies Monthly Maintenance Charges Taxable Under SAC 9995 at 18% GST [Read Order]

The bench of the West Bengal Authority for Advance Ruling (AAR) examined whether monthly or annual maintenance charges collected from occupants of residential and commercial units are liable to Goods and Services Tax. The question before the Authority was whether such charges constitute a taxable supply of services, and if so, the applicable Service Accounting Code (SAC) and rate of GST. The ruling clarifies the tax treatment of maintenance-related recoveries in real estate and leasehold development arrangements.

The applicant, Om Prakash Mahawar, proposed to develop a hotel-cum-shopping complex with residential units on land leased from West Bengal Housing Infrastructure Development Corporation Ltd. (WBHIDCO) for 99 years. In addition to transferring or assigning rights in constructed units to occupants, the applicant intended to levy monthly or annual maintenance charges from such occupants directly or through a maintenance society. These charges would be used for upkeep of common areas, utilities, security, and related services.

The applicant sought clarity on whether such maintenance collections are subject to GST, and if so, the applicable classification and rate.

Represented by Sunil Kumar Jain, the applicant submitted that prospective occupants of the constructed units may be required to pay monthly or annual maintenance charges, either directly to the applicant or to a maintenance society formed for this purpose. It was stated that such maintenance relates to the upkeep of common areas and shared facilities of the project.

The applicant further submitted that, in the case of residential units, such maintenance charges are classifiable under SAC 9995 (Services of Membership Organisations) and are eligible for exemption under Serial No. 77(c) of Notification No. 12/2017-Central Tax (Rate), subject to the prescribed conditions. In the case of commercial units, the applicant acknowledged that the same services fall under SAC 9995 and attract GST at 18% under Serial No. 33 of Notification No. 11/2017-Central Tax (Rate).

The bench comprising Dr. Tanisha Dutta, Joint Commissioner and Jaydip Kumar Chakrabarti, Senior Joint Commissioner ruled that monthly or annual maintenance charges collected from unit holders constitute a taxable supply of services under the Goods and Services Tax law. The Authority ruled that the supply is classifiable under SAC 9995 - Services of Membership Organisations, and the applicable GST rate is 18%.

The Authority clarified that the nature of the unit, whether residential or commercial, does not change the classification of the service itself, and such charges remain taxable unless a specific exemption applies under a separate entry which was not applicable in the present case.

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