Unjustified maintenance charges collected by builder
Chandraprakash B. Morjal
(Querist) 25 July 2018
This query is : Open
I have purchased a flat in Khativali Village of Shahapur Taluka in Thane District and got possession in 2013. The agreement for sale states about payment of building maintenance charges @ 1686/- per month for 3 years from the date of possession of the flat. Since the charges were unjustified and higher side, the builder was asked to form CHS or RWA immediately after the possession of the flat but the builder did not allow the residents to form the Co-operative Housing Society (CHS) or Residents' Welfare Association (RWA) unless the construction work of adjacent building is completed. Even on to-day the construction work of the adjacent building is not completed, and, in this way, the builder is continuously forcing flat owners to pay higher monthly maintenance charges at unjustified rate of Rs. 1686 per month (increased to Rs. 2248/- per month from 01-04-2018). As we know, in general, the maintenance charges are a sum total of Annual Repairs at minimum 0.75% of construction cost of a new building/flat plus reimbursable other expenses incurred by the builder on behalf of the flat owners. Accordingly, I have asked the builder to justify maintenance charges @ Rs. 1686 / 2248 per month for which he has chosen to be silent.
The builder is running the Real Estate business in the name and style of "Lakshmi Developers" but for the purpose of Maintenance Charges he has created a separate and independent entity in the name and style of "Lakshmi Developers Vrindavan" without consultation with the flat owners. From July 2017 onwards, flat owners are being forced to make payment of GST @ 18% even on reimbursable other expenses like Panchayat Tax, NA Tax, Electricity consumption for common premises, etc. Had the builder allowed the flat owners to form Co-operative Housing Society (CHS) or Residents' Welfare Association (RWA) within a reasonable period, the payment of GST on Maintenance Charges would have been on different footings. In view of the fact that the builder is running separate and independent entity like RWA, the payment of GST may be governed by such rules as applicable to CHS / RWA.
In view of the above, I am in need of your expert advice in light of the existing rules, regulations and practices in the matter relating to maintenance charges and GST thereon in such forced circumstances as explained above.
Hemant Agarwal
(Expert) 26 July 2018
1. IT is absolutely NOT necessary that Builder should form Society /RWA nor it is legally necessary to from Society /RWA only after entire project is completed by builder.
2. You can form Society /RWA on your own, provided a minimum of 10 persons join in the Application to form Society /RWA. This can be done without the consent /permission of the Builder.
3. It takes approx. 3 months to receive the Certificate of Registration from the relevant authorities and AFTER that you can run your Society at your own terms and conditions, as may be permissible under the law, which includes deciding and levy of Service & Maintenance charges. After Society /RWA is formed, you will not be liable to pay GST, IF your monthly bills is less than 7500/- PM.
Contact me, for basic discussions.
Keep Smiling .... Hemant Agarwal
Chandraprakash B. Morjal
(Querist) 26 July 2018
Respected Shri Hemant Agarwal Sahib, I am thankful to you for furnishing comments on my query. You have explained the procedure for formation of CHS / RWA even without consent of the builder provided a minimum 10 persons join in the application to form Society/RWA. You have agreed that it is not legally necessary to form Society / RWA only after entire project is completed by builder. However, the following points remain unresolved in my case:
(1) My building consists of 10 flats, of which 2 flats are unsold till to-day.
(2) The builder has not allowed the flat owners to form Society/RWA means if we form Society/RWA without consent of the builder, he will not agree to conveyance the property in favour of Society/RWA. Without conveyance of the property how the Society will get the legal status?
(3) We are ready to pay justified Maintenance Charges, i.e. a sum total of Annual Repairs @0.75 per cent of construction cost plus other reimbursable charges.
(4) It is more than 5 years the builder has deprived the flat owners to form Society for want of a minimum 10 persons to form Society/RWA and forcing us to pay unjustified amount of Maintenance Charges.
(5) The builder is not directly collecting Maintenance Charges. The collection is being made through a separate and independent entity like RWA in the name and style of Lakshmi Developers Vrindavan. This entity is created by the builder without consultation of the flat owners. However, we are not liable to pay GST as the amount my monthly bills is less than Rs. 7500/- per month.
(6) The Lakshmi Developers Vrindavan (Independent entity created by the builder) is insisting for GST @ 18 per cent on the reimbursable amount towards Panchayat Tax, N.A. Tax, Electricity Consumption for common premises. I think taxes, whever applicable, are already included in such charges and there should not be tax on tax.
