Advance Ruling | Section 11 | Entry No. 1| CGST Act 2017 | Exemption Related to Charitable Sector

Serial No. 1 of Exemption Notification :- Exemption related to charitable sector

Service by an entity registered under section 12AA of the income tax Act, 1961 by way of charitable activities

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Charitable Activities 

Public health by way of – 

A) care or counselling of 

(I) terminally ill persons or persons  with severe physical or mental disability;  

(II) persons afflicted with HIV or AIDS;  

(III) persons addicted to a dependence   -forming substance such as narcotics  drugs or alcohol;  or

(B) public awareness of preventivehealth, family planning or prevention of HIV infection;

Advancement of religion, spirituality or yoga Advancement of educational programmes or skill development relating to: 

(A) abandoned, orphaned or homeless children; 

B) physically or mentally abused and traumatized persons; 

(C) prisoners; or

(D) persons over the age of 65 years residing in a rural area;

Preservation of environment including watershed, forests and wildlife.

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Advance Ruling

Advance Rulings

Name of the applicant: Shrimad Rajchandra Adhyatmik Satsang Sadhana Kendra

Application No..: 41 Dated : 17/03/2018

Authority: AAR (Maharastra)

Questions Sought by the applicant:

1) Whether the applicant which is a charitable trust with main object of the advancement of religion, spirituality or yoga is liable to registration under the provisions of Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017?

1) Whether sales of spiritual products which is incidental / ancillary to main charitable object of the applicant can be said to be business of the applicant in terms of the definition in Section 2(17) of the Central Goods and Service Tax Act 2017 and option provision of Maharashtra Goods and Service Tax Act 2017?

Brief facts:

Shrimad Rajchandra Adhyatmik Satsang Sadhana Kendra (hereinafter referred to as “applicant’) is a public charitable and religious trust engaged in advancement of the teachings of Param Krupalu Dev Shrimad Rajchandra and spreading the knowledge of Jain Religion entrusted by Shri Mahavir Swami and other Tirthankars.

 The ancillary and incidental objects of the applicant trust are to carry out activities for advancement of  main object such as Satsang Shibir, etc. To spread knowledge of the Jain Dharam through publications of books, audio CDS, DVDs, etc. and other materials for students and public in general and to set up organizations for helping people. The ancillary object also includes, protecting birds and animals from being killed in slaughter houses and other activities.

Submission of Applicant:

1) The Applicant is not carrying on business in terms of Section 2(17) of the CGST Act, 2017

2) Once the main object of the applicant cannot be considered as business, the ancillary or incidental objects also cannot be considered as business.

3)  The applicant submits that the applicant does not make any taxable supplies so as to be liable for registration under the provisions of Section 22(1) of the CGST Act, 2017.

4) The applicant further submits that the fundamental objective of trust is Spiritual Activities and other activities are social services, public Aids, religious activites and activities of spreading the knowledge.

Facts and Findings- As per concerned officer :-

1)  Activities of Applicant has been covered under the definition of Sec 7 “Scope Of Supply”

(i) For the purposes of this Act, the expression “supply” includes

(a) 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;…………………

In view of the above detailed discussions its very apparent that the applicant is engaged in Trade and Commerce by way of selling of goods and services as per detailed discussion above and are very well covered under the definition of business’ as given under Section 2(17) of the CGST Act and in view of this, their activities are very well covered within the scope of supply as given in Section 7 of the CGST Act, 2017  and are therefore liable to tax as applicable in respect of goods supplied or services rendered.

Now we refer to their claim for exemption as per they being a charitable trust.

We find that the Charitable Trust must satisfy the following two criteria to avail exemption from payment of GST in case of services,

1) The entity must be registered under section 12AA of the  Income Tax Act.

2) The services provided by the entity must be a charitable activity.

2) We find that the applicant is registered under Section 12AA of the Income Tax Act but the activities being undertaken by the applicant in respect of service being provided by them are not covered under the definition of charitable activities

3) From the information provided by the concerned Officer/ Jurisdictional officer, we see that applicant trust generates income from sale of goods, provides for accommodation and foods in various Shibit/Satsang on payment/chargeable basis. The Charitable Trust organize Shibir/Satsang for participant and they are not free for the participants, as the trust charge some amount from the participants in the name of accommodation or participation. Satsang is the only activity provided by the applicant free of cost to the participant. As such arranging residential or non-residential Satsang /Shibir/yoga camps by accepting/charging some amount from the participants will not be covered under “charitable activities within the meaning of definition provided at Definitions at 2 (r) of notification No. 12/2017 Central Tax (Rate) dated 28/06/2017 of the expression charitable activities and in particular advancement of religion spirituality or yoga

Ruling

1) Applicant shall not covered under ” Charitable Activities” within the meaning of definition, Hence there is requirement to registered under GST Act, 2017.

2) Sales of spiritual products which is incidental / ancillary to main charitable object of the applicant is covered under definition of  business of the applicant in terms of the Section 2(17) of the Central Goods and Service Tax Act 2017.

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Name of the applicant: M/s. Dream Runners Foundation Limited

Application No..:O01  Sl.No. 12   Dated: 27.03.2018

Authority: AAR (Tamil Nadu)

Questions Sought by the applicant: 

i. Whether the conduct of marathon events by the Trust through which donations are raised for charity is an exempted service under GST?

ii. When the Trust is approved under Sec 12AA of the Income Tax Act 1961 which means that the service of the Trust is charitable in nature, does it not automatically become a charitable activity that is exempted under GST?

iii. As the service rendered by the Trust is a charitable activity within the definition of Clause 2(r) of Notification No.12/2017-Central Tax (Rate), is registration under GST required?

Brief facts:

The principal objects of the Trust as per the Trust Deed is to organize events like Marathon, Blood Donation Camp, Organ Donation Camp, Eye Donation Camp, Health Awareness Camp etc and ulilize the funds raised from such events for Charitable Cause like funding to Non-Governmental Organizations (NGOs), Hospitals, Trusts and other Charitable Organizations. Apart from the above the Applicant also conducts camps, seminars, meetings, publicity and prevention for terminal illness like cancer, AIDS etc., and they also promote, administer, support, maintain and or grant aid to any NGO’s institutions or organizations having similar objectives like the Applicant in India. The Applicant has also stated that each of the mentioned objectives shall be independent of each other
and none of the objects involve carrying of any business, trade or any activity for profit.

Submission of Applicant:

1) The Trust had organized and conducted every year a marathon event named Dream Runners HaIf Marathon since 2012. The event involved collecting donations from the participating  runners and also money pooled in through corporate donations for the event. The amount so received is utilized for the conduct of the event that includes permit and approval fees, fees paid to the government authorities, expenses for the conduct of the event that includes prize money for the winners and the balance left is paid as donations to the NGOs supporting the cause or directly to the beneficiaries.

2) The Applicant has further stated that they conduct event always for a public cause. The cause for the last three editions was for prosthetic legs. The net proceeds of the event were, for the last three years, donated to Freedom Trust, a NGO engaged in providing prosthetic limbs to the less privileged public in Tamil Nadu apart from direct beneficiaries like Awai Home, a school for poor and orphans and Olcott Memorial School

3) The Applicant has also submitted that under the Service Tax regime Vide Notification No. 25/2012- Service Tax dated- 20th June 2012, as amended by incorporating changes made till issuance of Notification no 10/2017-Service Tax dated 8-3-2017, the Central Government, under Para 4 exempted the services by an entity registered under section 12AA of the Income Tax Act, 1961

The activities of the Trust were not under the purview of Service Tax legislation as it satisfied the conditions, for exemption viz.
i. Services provided by the entity registered u/s 12AA of Income Tax Act, 1961, and

ii. Services were charitable activities defined as the principal objects of the trust.

Hence no Service Tax was collected on donations received front the participants of the marathon event as it was considered as a charitable activity under Service Tax

Facts and Findings- As per concerned officer :- 

1) By taking reference of definition under section 2(31) ” Consideration”

“The money collected by the Applicant, from the participant in the Marathon is used for the expenses of organizing the Marathon in terms of paying the registration,partner, event management charges, prize money, publicity, other organizing expenses such as T-shirts, banners and other related materials etc. as seen in their balance sheets. Therefore, the money  collected from the participants is a consideration towards the supply of service of organizing and conducting the marathon for the participant’s conduct of marathon event and the same is liable to GST”

2) The Applicant has claimed that their activities are exempted under Sl.No. 1 of Notification No.12/2o17-Central Tax (Rate) dated 28th June 2017

The Applicant is an entity registered under Section 12AA of Income Tax Act. However, for the purposes of CGST Notification No. 12/2017-C.T.(Rate) dated 28th June 2017 and SGST Notification No.II(2)/CTR/532(d-15)/2017 vide G.O. (Ms) No. 73 dated 29.06.2017, only those activities of such an entity are exempt from GST which qualify under the definition of “charitable activities” given in the notification. This activity of conduct of Marathon event by the Applicant does not fall under the definition for Charitable activities.  Therefore, though the Applicant is an entity registered under Section 12 AA of the Income Tax Act and conducts the Marathon events for raising funds for charitable activities, the exemption under Sl.No. 1 of these notification does not apply to the activity of organizing the marathon by the Applicant.

3) As per Section 22 of CGST/TNGST Act, every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his
aggregate turnover in a financial year exceeds twenty lakh rupees. In the instant case, the Applicant’s annual turnover is more than Rs 20 lakhs and they are providing the taxable supply of organizing marathon events. Hence, they are liable to register under CGST /TNGST Act.

RULING

i) The conduct of Marathon event by the Applicant for the participants is a not an exempt supply under CGST/TNGST Act

ii) Only those activities of Applicant, who is a Trust is under Sec 12AA of the Income Tax Act  1961, which fall under the definition of “charitable activities” as per Clause 2(r) of Notification 12/2017 Central Tax(Rate) dated 28th June 2017 and Notification No.II(2)/CTR/532(d-15)/2017 vide G.O. (Ms) No. 73 dated 29.06.2017 are exempt.

iii) As the Applicant is supplying taxable supply of services such as organizing marathon etc. and has aggregate turnover in a financial year exceeding twenty lakh rupees, the Applicant is required to be registered under CGST/TNGST Act.

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Name of the applicant: M/s Children of the world India trust

Application No..: 15 Dated : 13/05/2019 Authority: AAR (Maharastra)

Questions Sought by the applicant: 

1) Whether the activities conducted by The Children of the World (India) Trust are the “Charitable Activities” exempted under the Notification 12/2017 Central Tax(Rate) dated 28th June 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.

Brief facts:

Applicant has established a “Vishwa Balak Kendra” in its own building constructed on Plot No. 9 and 10, Sector 12, Nerul, Navi Mumbai-400 706 where we provide shelter to abandoned, orphaned or homeless children. All the aspects regarding admission, registration, maintenance, nutrition, health, process of adoption (including fees on adoption) and handing over of the adopted children to the adoptive parents is strictly regulated to the minutest details by the Government of India under various provisions of The Juvenile Justice (Care and Protection of Children) Act, 2015 (hereinafter referred to as the ‘The JJ Act”) read with The Juvenile Justice ( Care and Protection of Children) Model Rules, 2016 (hereinafter referred to as “The JJ Rules’) as well as The Adoption Regulations, 2017 (hereinafter referred to as the ‘The Adoption Regulations”).

Submission of Applicant:

1) The Applicant says and submits that as an agency of the Government the Applicant has no control over the admission of a child in the SAA, nor has any control over selection of a child for adoption, nor has any control over selection of the prospective adoptive parents or their selection of any adoptive child, nor has any control over approving the adoption application. Every aspect is controlled and processed by the Government through its organ -Central Adoption Resource Agency (CARA) established by the Government under Section 68 of the JJ Act.

2) The Applicant submits that:

(a) The adoptive child is certainly not “Goods” in terms of section 2(52) of the CGST Act.

(b) No taxable supply of services as defined in section 2(108) is made by the Applicant to the Adoptive Child, and or to the Government and or to Prospective Adoptive Parents.

(c)  The activities of the Applicant are “Charitable Activities” in terms of the GST Exemption Notification dated 12/2017

(d) No consideration is received by the Applicant. What is received is only a partial reimbursement of the expenses up to the limit prescribed by the Government and NOTHING MORE. 

(e) The Applicant is not engaged in any “Business” at all.

 Facts and Findings- As per concerned officer :-

1) In this context, we find from the FAQs issued by CARA (Central Adoption Resources Agency in their official website cara.nic.in that the adoption fee collected by the institute is strictly in terms of guidelines fixed by the Adoption Regulations, 2017 issued under the JJ Act.

As per the Regulations Specialized Adoption Agency (SAC) can charge a fee of Rs.40,000 under the head Child Care Corpus from the adoptive parents. The applicant, being a SAA, charges fees of R$ 40,000 as a corpus which in turn is used for shelter, food, clothing, foster care, maintenance, medical treatment and primary education and basic computer skills of these abandoned children/orphans in their Bal Vikas Kendras till the time they are adopted. During the course of the hearing the Applicant produced pictures of children learning alphabet, drawing and interaction with computers in support of their arguments,

In view of the submissions made by the applicant and the observations made by us, we find that 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 Fees by the applicant from the Prospective Adoptive Parents to the Trust is exempted from the children. Such activities are clearly covered under Sr. No. 1 of Notification No.12/2017-C.T. (Rate) dated 28.06.2017 and are exempted by the said notification. Therefore the receipt of the Adoption levy of Goods and Services Tax.

Ruling

The activities conducted by the applicant are Charitable Activities” which are exempted underNotification No.12/2017-C.T. (Rate) dated 28.06.2017 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-C.T. (Rate) dated 28.06.2017 as amended.

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Similar Advance Rulings connected with serial no: 1 of exemption notification:

Name of the applicant: M/s Nagri Eye Research Foundation.

Application No..: 39 Dated : 30.07.2018

Advance Ruling No.: GUJ/GAAR/R/2020/08 Authority: AAR (Gujrat)

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Name of the applicant : M/s Swayam

Case No. :04 of 2020 Dated: 26/02/2020

Order number and date : O3/WBAAR/2020-21 Dated 29/ 06/2020 Authority: AAR (West Bengal)

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