Supply is the taxable event under GST. Section 7(1) (a) defines ‘Supply’ includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. So the consideration & furtherance of business is the basic principles determines taxability, if consideration paid by one person to another person against supply of goods or services is liable to GST and except activities specified in Schedule III but includes activities specified in Schedule I of the CGST Act, 2017.
The adoption fee charged by a Charitable Trust is nothing but consideration for providing services to children and the said consideration is qualify as supply under GST Laws. Here, moot question arises. Whether reimbursement of expenses for adoption fees is liable to GST? This is answered by the Advance Ruling Authority, Maharashtra:
Advance Ruling:
Brief facts:
The applicant is a charitable organisation and Specialized Adoption Agency registered under Juvenile Justice ( Care and Protection of Children) Act,2015 (JJ Act) engaged in housing , educating and skill developing of abandoned, orphaned or homeless children and arrange for their subsequent adoption by willing parents in terms of Juvenile Justice ( Care and Protection of Children) Model Rules,2016 and Adoption Regulations,2017, applicant is required to charge a onetime consolidated fee as reimbursement of expenses incurred on such children. The applicant seeking an advance ruling in respect of the following question:
Whether the activities conducted by the Children of the World India Trust are the “Charitable Activities” exempted under the Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 as amended and consequently, the receipt of the Adoption Fees paid under Regulation 46 of the Adoption Regulations, 2017 by the Prospective Adoptive Parents to the Trust is exempted from the levy of Goods and Services Tax.
Contention of the applicant:
The applicant contended that their activities are not covered in the definition of ‘supply or business’ and hence GST is not leviable. Even if it is held that their activities are covered under the definition of ‘supply or business, it would still be covered under the Notification 12/2017-C.T., dated 28.7.2017 as amended, under Entry No.1 i.e. “Advancement of educational programmes or skill development relating to abandoned, orphaned or homeless children”. Their activities include, admission and taking care of orphaned, abandoned children between 1-6 years till they are adopted by prospective parents. They are covered by Juvenile Justice Care and Protection Act, 2015 and Rules, 2016. Their activities are governed by Central Adoption and Resource Agency (CARA) as child welfare committee.
Observations of AAR:
The applicant, along with providing for advancement of educational programmes or skill development relating to abandoned, orphaned or homeless children, is also providing a ‘service of facilitating adoption’ and receiving consideration in the form of adoption fees for such facilitation services rendered by them. Therefore, their activities are covered within the scope of CGST / SGST Act.
Further, observe that the applicant is a Charitable Trust registered under Section 12AA of the Income Tax Act, 1961 (IT Act) and is strictly regulated by the Government of India under the provisions of The Juvenile Justice (Care and Protection of Children) Act, 2015 (JJ Act) read with The Juvenile Justice (Care and Protection of Children) Model Rules, 2016 (JJ Rules) as well as The Adoption Regulations,2017 and the applicant as per JJ Act and JJ Rules, are registered as a “ Specialized Adoption Agency” . Thus they are an institution recognised under Section 65 of the said Act, for housing orphans abandoned and surrendered children placed there by order of the Committee for the purpose of adoption. Every aspect of their activity is controlled and processed by the Government through its organ, namely, the Central Adoption Resource Agency (CARA) established by the Government under Section 68 of the JJ Act. They have established a shelter, namely, “Vishwa Balak Kendra”, in their own building and provide shelter, food, clothing, healthcare, foster care and basic education to abandoned, orphaned or homeless children below 6 years of age till the time of adoption. Their activities which are in the nature of “Charitable Activities”, also consists of advancement of educational programmes or skill development relating to abandoned, or phaned or homeless children. Such activities are clearly covered under Sr. No. 1 of Notification No.12/2017-C.T. (Rate), dated 28-6-2017 as amended from time to time and the applicant being an entity registered under Section 12AA of the IT Act, such activities carried out by the applicant are exempted by the said notification.
Findings of AAR:
In view of the submission made by the applicant and observations made, their activities including the activity of facilitating the adoption of the children by the Adoptive parents, are in the nature of “Charitable Activities”, which also consists of advancement of educational programmes or skill development relating to abandoned, orphaned or homeless children. Such activities are clearly covered under Sr. No. 1 of Notification No. 12 /2017-C.T. (Rate), dated 28-6-2017 and are exempted by the said notification. Therefore the receipt of the Adoption Fees by the applicant from the Prospective Adoptive Parents to the Trust is exempted from the levy of Goods and Services Tax.
Order of AAR:
The activities conducted by the applicant are “Charitable Activities” which are exempted under Notification No. 12/2017-Central Tax ( Rate), dated 28-6-2017 as amended. The receipt of the Adoption Fees paid under Regulation 46 of the Adoption Regulations, 2017 by the Prospective Adoptive Parents to the Trust is exempted from the levy of Goods and Services Tax exempted under Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 as amended.
The Author is a practicing advocate at Orissa High Court and can be reached at rameshjena2009@gmail.com.
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