Today, after introduction of Goods and Service Tax w.e.f 01.07.2017, almost each and every transaction directly or indirectly has impact of GST. If a particular product is exempted from GST, even than it has impact of GST on account of related Services like transportation, loading/unloading storage etc.  Electricity which is outside the preview of GST has its taxation impact on every item. Similarly, Petroleum and Diesel which have been kept outside the preview of GST have highest taxes cost on all goods and services. Water supply for house consumption also has GST impact as need lot of equipments and labour supply which attract GST and is being charged from the consumer.

 So, in net shell if we say that a particular product or service is exempted from GST it is not true. Even items which have been exempted from GST like wheat, flour (unbranded) Milk etc. has inbuilt impact of GST. Similarly, in case of Langar, as offered to the devotees at Gurudwara sahib though not taxable but cannot be made GST free as the provisions of GST Act are such  that  it carries GST impact even if items purchased for preparation of langar made exempted from GST. To make langar at gurudwara sahib, we need lot of other services like transportation of material up to gurudwara sahib, loading/unloading, Storage in warehousing prior to Gurudwara sahib etc. Similarly, we may be using electricity while preparing langar at Gurudwara Sahib which has full indirect tax impact of Electricity Duty which is levied by State government. We might be using Diesel for generators or otherwise which has full tax component in its cost.

Similarly, items used for housing keeping of the premises are subject to GST and we can’t avoid it.  Equipments used for preparation of langar are also subject to central taxes as were prior to GST. Any repair to these items also attract GST even if offered free of cost by any devotee.

So demand of SGPC for making inputs of Langar  tax free may be genuine but practically it may not solve the purpose as all items directly or indirectly are under the impact of GST. Further, exemption to such items may lead to corruption and anti social elements may misuse the scheme of exemption. From administration point of view also it will be difficult to monitor such transactions as it will be having major impact all over. After exemption to one institution, other religious organizations will also ask for similar exemptions which will defeat the overall objective of the GST.

To control the complete supply chain under GST, even military canteens, Embassies or such other organizations have been brought under the ambit of GST and they have been ruled to pay tax first and then claim refund by submitting their necessary information in prescribed manner. This process fixes their responsibility and makes them accountable for the refunds. Similar format can be a solution if government accepts their demand of exemption of inputs to langar.

Punjab government can’t exempt the inputs to langar on its own. It has to put up the matter in GST Council and if council agrees and recommend the same to the Parliament and subsequently if the Parliament approve such scheme of exemption, only than it can be possible. But then on the similar grounds other religious organizations will start putting pressure on respective state governments for similar exemption which will defeat the basic concept of GST.

As GST is only three weeks old and we already had so many changes and expect more. With the passage of time gradually things will be settled down and there can be a situation where we may be at par with pre-GST regime. So let us wait and watch for the positive results that may come from this new tax reforms.

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Qualification: CMA
Company: ANIL SHARMA & CO. (Cost Accountants)
Location: CHANDIGARH, Chandigarh, IN
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  1. Raminder Singh Kohli says:

    Very practical view. In fact all state govt. should take lead in coming out with some procedure to refund the GST to Gurudwaras, temples & other charitable institutions providing this kind of facilities.

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January 2021