GST on Charitable and Religious Trust

The provisions relating to taxation of activities of charitable institutions & religious trusts have been borrowed and carried over from the erstwhile service tax provisions. All services provided by such entities are not exempt. There are many other services, which would be within the extent of GST.

NOTIF No.12/2017-Central Tax (Rate), exempts services provided by entity registered under Sec. 12AA of the Income-tax Act, 1961 by way of charitable activities from whole of the notification, which specifies that “services by an entity registered under Sec 12AA of Income-tax Act, 1961 by way of charitable activities” are exempt from the GST. Thus, 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. It is essential that the activities must conform to the term “charitable activities’ which has been defined in the notification as under “charitable activities” means activities relating to:

(1.) Public health by way of:-

• care or counseling of :
  • terminally ill persons or persons with severe physical or mental disability;
  • persons afflicted with HIV or AIDS;
  • persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or
• public awareness of preventive health, family planning or prevention of HIV infection;

(2.) Advancement of religion, spirituality or yoga;

(3.) Advancement of educational programme or skill development relating to:

• abandoned, orphaned or homeless children;
• physically or mentally abused and traumatized persons;
• prisoners; or
• persons over the age of 65 years residing in a rural area;

(4.) Preservation of environment including watershed, forests and wildlife.

It makes the exemption available for charitable activities more specific. While, the income from those activities listed above is exempt from GST and other than mentioned above is taxable. Thus, there could be many services provided by charitable and religious trust which are not considered as charitable activities and hence, such services come under the 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.

GST law has talked about GST exemptions, when a charitable trust rents out religious meant for general public (owned and managed by a registered charitable trust under 12AA of the Income Tax Act, 1961). GST will be exempted when:

> Rent out rooms are charged lesser than Rs. 1,000/- day.

> Kalyanmandapam or an open area is charged lesser than Rs. 10,000/- day.

> Rent out shops and other spaces for business are charged less than Rs. 10,000/- month.

As per CBIC Circular No. 66/40/2018-GST, dated 26th September 2018 – “The services provided by entity registered under Sec. 12AA of the Income Tax Act, 1961 by way of advancement of religion, spirituality or yoga are exempt. Fee or consideration charged in any other form from the participants shall be exempt. Residential programmes or camps where the fee charged includes cost of lodging and boarding shall also be exempt as long as the primary and predominant activity, objective and purpose of such residential programmes or camps is advancement of religion, spirituality or yoga.

However, if charitable or religious trusts merely or primarily provide accommodation or serve food and drinks against consideration in any form including donation, such activities will be taxable. Similarly, activities such as holding of fitness camps or classes such as those in aerobics, dance, music etc. will be taxable”.

For instance:- Services of a NGO registered under sec. 12AA of the Income Tax Act, 1961 working for the rehabilitation of disabled. The aggregate value of taxable supply is Rs. 20 Lakhs’.

As per entry 74A of NT No. 12/2017 C.T. Notification No. 28/2018-CT(R), dated 31st December 2018: Services provided by rehabilitation professionals recognized under the Rehabilitation Council of India Act, 1992 (34 of 1992) by way of rehabilitation, therapy or counseling and such other activity as covered by the said Act at medical establishments, educational institutions, rehabilitation centers established by Central Government, State Government or Union territory or an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) is exempt from GST. Therefore, NGO is not liable to pay GST.

> Healthcare services and Ambulance Services provided by the Charitable trust or religious Trust is exempt from GST if the doctors is giving treatment of diagnosis, care for illness, injury, deformity, abnormality or pregnancy but does not include hair transplant, cosmetic, plastic surgery except when undertaken to restore or to reconstruct anatomy of the body affected due to congenital defects, injury or trauma.

> Supply of food and beverages to the patients is also not taxable. Food supplies to attendant or visitor is taxable. All other services other than mentioned above related to health care services is taxable in GST.

> There is no exemption for supply of goods by charitable trusts. Thus, any goods supplied by such charitable trusts for consideration shall be liable to GST.

> No GST will be applicable if charitable trusts are running public libraries and lend books, other publications or knowledge enhancing content/material from their libraries.