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Leviability of GST For Charitable Entities
-CA. Udit Maheshwari
Background
Before going into the technicality of GST Law for charitable Trust, let us understand the history that why charitable trust took existence in India or any other part of world. Every person in the world does not have equal opportunity for their education, health, entertainment, religion etc. main reason behind this is uneven distribution of income among people.
To facilitate those deprived part of population who does not have access to these facilities, charitable trust come into existence for their betterment and equality.
On similar note, GST has also taken care the purpose of charitable trust by providing them various exemptions under various circulars. Let us discuss that what are those exemptions available which a charitable trust can avail.
Taxability under GST Law
As per Section 9 of CGST, Act-2017, any service provided by a taxable person is subject to tax under GST law. However there are few exemption provided either by way of taxing those goods or services at 0% or by inserting them under the list of exemption (Notification No.12/2017-Central Tax (Rate) dated 28th June 2017).
Similarly services provide by Charitable Institutions have been exempted from Tax subject to certain conditions.
Above said notification exempts services provided by entity registered under Section 12AA of the Income-tax Act, 1961 by way of charitable activities. Thus as per this notification, exemption is given to the charitable trusts, only if the following conditions are satisfied.
- Entities must be registered under Section 12AA of the Income tax Act, and
- Such services or activities by the entity are by way of charitable activities.
Charitable Activities
Exemption 1- General Services
To avail the benefit of exemption, it become necessary that the services provided must conform to the term “charitable activities’ which has been defined in the notification as under “charitable activities” means activities relating to:
S.no | Nature of Service | Details |
1 | Public Health | · Care or counselling of terminally ill person or with severe disability; affected by HIV or AIDS; addicted to drugs or alcohol. · Public awareness for preventive health, family planning, HIV infections. |
2 | Religion | Advancement of religion, spirituality or yoga |
3 | Education | Programmes or skill development for abandoned, orphaned or homeless children; prisoners; person above age of 65 living in rural areas etc |
4 | Environment | Preservation of environment including watershed, forests and wildlife. |
Above said notification provides the exemption to charitable trusts available for charitable activities more specific. While the income from activities mentioned supra are exempt from GST, otherwise income from the activities other than those mentioned above is taxable. Thus, many other services provided by charitable and religious trust which are not considered as charitable activities under list mentioned in above table and hence, such services come under the ambit of GST. The indicative list of such services could be renting of premises by such entities, grant of sponsorship and advertising rights during conduct of events/functions etc.
Exemption 2- Renting of Immovable property
However to safeguard the interest there is limited exemption available for services provided in relation to renting of premises by entities registered under Section 12AA of the Income Tax Act:
S.no | Nature of Service | Details |
1 | Religious ceremony | Conduct of any religious ceremony |
2 | Renting | Renting of precincts of a religious place meant for general public limited to: · Renting of rooms charging rent less than Rs. 1000 per day · Renting of premises, community hall, open area etc charging rent less than Rs. 10,000 per day · Renting of shops or other space for business purpose charging rent less than Rs. 10,000 per month |
Analysis
As per said notification, the term “general public” means “the body of people at large sufficiently defined by some common quality of public or impersonal nature”.
The term “religious place” as per said notification means “a place which is primarily meant for conduct of prayers or worship pertaining to a religion, meditation, or spirituality”.
“Precincts” has not been defined in the said notification, however dictionary meaning of “precincts” is an area within the walls or perceived boundaries of a particular building or place, an enclosed or clearly defined area of ground around a cathedral, church, temple, college, etc.
Thus, it implies that if immovable properties owned by charitable trusts like marriage hall, convention hall, rest house for pilgrims, shops situated within the premises of a religious place and such premises are rented out, income from letting out of such property is wholly exempt from GST, subject to the limits mentioned in above table. But if such properties are not situated in the precincts of a religious place meaning thereby not within walls or boundary walls of the religious place, income from such letting out will lose this exemption and income from it will be liable to GST.
Exemption 3 – Educational Services
Apart from services provided by charitable entities indulge in educational field, if any person providing specified services in relation to education to charitable trust, then such services are also exempt from GST.
S.no | Services provided by | Nature of service |
1 | Charitable entity or educational institute | i. Any service provided to its students, faculty and staff including any canteen facility provided to its students, faculty and staff. ii. By way of conducting entrance exams against entrance fees
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2 | Other person to Charitable entity or educational institute | i. By way of transportation for students, faculty and staff ii. By way of catering including mid -day meal programme iii. Security, cleaning or house-keeping iv. In relation to conducting examination v. Supply of online educational journals |
Note:- Provided that for S.no 2(i), (ii) & (iii) exemption is available to only those institution which are providing education services up to higher secondary school or equivalent
Note:- Provided that for S.no 2(v) exemption is not available to those institution which are providing education services up to higher secondary school or equivalent; or approved vocational course.
Other Services
S.no | Nature | Exemption available |
1 | Sports training or coaching in recreational activities | Yes |
2 | Yoga and Meditation Camp | No |
3 | Running Public Libraries | Yes |
4 | Supply of Goods | No |
Conclusion
After detailed understanding of all exemptions available to charitable entities, a conclusion can be drawn that though purpose of charitable trust is not to earn profit and in line with the purpose many services have been kept out the ambit of GST as mentioned in this article. However, there are certain situations where GST has to be levied so that one cannot misuse such exemptions available to charitable entities.
