Critical analysis of Taxability of Charitable & Religious Trusts under GST

GST is leviable on the supply of Goods & Services.

Sr. No. 1 of Exemption Notification No. 12/2017- Central Tax (Rate) New Delhi, the 28th June, 2017 gives   exemption to Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities.

In the Definition Clause No. (2) to the above Notification, The words ‘Charitable Activities’ are defined in Clause (r). Sub clause (ii) to the same exempts services relating to ‘advancement of religion, spirituality or yoga’.

The moot question is that, whether ‘services relating to ‘Advancement of religion’ at all be considered as a supply of service under the GST law so as to be exempted!! It has been decided in catena of Excise decisions that an Exemption cannot decide the Taxability. So it is imperative to know one’s rights in this regard.

Article 25 and 26 give fundamental right of religion to each of the citizens and their religious spiritual activities, still we see Section 12A/12 AA/12 AB of Income Tax Act imposing several conditions as to the management of income and assets of the charitable Trusts. Even E’flier published by CBIC mentions as follows:-

GST on supply of goods by Charitable Trusts :-

“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. For instance, sale of goods shall be chargeable to GST.”

So what is the exact position in this regard?

What about the supply of CDs, DVDs, books etc. by such Charitable/religious trusts? Are they still liable for GST upon their sale, which sale may be at a loss and which may be without any intention to make a profit?

Also what is the taxability on the online sale of Prasadam delivered at your home?  Also what about the taxability on the rendering services of performing Archana/Pooja being conducted on one’s behalf at various Temples?

In this regard can one rely on the decision of Commissioner Of Sales Tax vs. Sai Publication Fund to contend for the exemption under GST in view of the fact that such relief was denied in the case of In re Shrimad Rajchandra Adhyatmik Satsang Sadhana Kendra by both AAR as well as AAAR.

Also what are the constitutional rights given to a citizen w.r.t. his religious practices and beliefs as well as to such Charitable/Religious Trusts regarding their income, properties etc.?

This article tries to deal with all such questions by referring to constitutional provisions and case laws.

Also an effort is made to critically analyse the applicability of Sai Publication’s case visa vis. the case of Shrimad Rajchandra Adhyatmik Satsang Sadhana Kendra.

To start with there are certain constitutional/legal provisions that need to be understood.

Central Government Act

Article 25 in The Constitution Of India 1949

25. Freedom of conscience and free profession, practice and propagation of religion

(1) Subject to public order, morality and health and to the other provisions of this Part, all persons are equally entitled to freedom of conscience and the right freely to profess, practise and propagate religion

(2) Nothing in this article shall affect the operation of any existing law or prevent the State from making any law

(a) regulating or restricting any economic, financial, political or other secular activity which may be associated with religious practice;

(b) providing for social welfare and reform or the throwing open of Hindu religious institutions of a public character to all classes and sections of Hindus Explanation I The wearing and carrying of kirpans shall be deemed to be included in the profession of the Sikh religion Explanation II In sub clause (b) of clause reference to Hindus shall be construed as including a reference to persons professing the Sikh, Jaina or Buddhist religion, and the reference to Hindu religious institutions shall be construed accordingly.

 Article 26 in The Constitution Of India 1949

26. Freedom to manage religious affairs Subject to public order, morality and health, every religious denomination or any section thereof shall have the right

(a) to establish and maintain institutions for religious and charitable purposes;

(b) to manage its own affairs in matters of religion;

(c) to own and acquire movable and immovable property; and

(d) to administer such property in accordance with law

 The implications of the aforesaid Articles on the religious rights of the citizens and over the administration of properties/income etc. of religious/ charitable Trusts are discussed threadbare by the full bench of Supreme Court in the case of THE COMMISSIONER, HINDU RELIGIOUS ENDOWMENTS, MADRAS … vs Sri Lakshmindra Thirtha Swamiar … on 16 April, 1954 equivalent citations: 1954 AIR 282, 1954 SCR 1005

In this decision, learned judges clearly demark individual citizen’s right of religious practices from the sovereign powers of the Government to guide, control and supervise the trust properties on the basis of Articles 25 and 26 of ‘The constitution’ of India. While government can’t control religious practices and rituals but has powers to guide and control/supervise properties of the religious trust and the ways in which trust property is being managed or administered.

I am reproducing relevant extracts from the aforesaid decision in which Supreme Court elaborated upon Article 25 and 26 of ‘The Constitution’, which are directly connected with the issue in hand.

This decision makes a good read as to what is religion and what are religious practices.

“We now come to article 25 which, as its language indicates, secures to every person, subject to public order, health and morality, a freedom not only to entertain such religious belief, as may be approved of by his judgment and conscience, but also to exhibit his belief in such outward acts as he thinks proper and to propagate or disseminate his ideas for the edification of others. A question is raised as to whether the word “persons” here means individuals only or includes corporate bodies as well. The question, in our opinion, is not at all relevant for our present purpose. A Mathadhipati is certainly not a corporate body; he is the head of a spiritual fraternity and by virtue of his office has to perform the duties of a religious teacher. it is his duty to practise and propagate the religious tenets, of which he is an adherent and if any provision of law prevents him from propagating his doctrines, that would certainly affect the religious freedom which is guaranteed to every person under article 25. Institutions as such cannot practise or propagate religion; it can be done only by individual persons and whether these person propagate their personal views or the tenets for which the institution stands is really immaterial for purposes. It is the propagation of belief that is protected, no matter whether the propagation takes place in a church or monastery, or in a temple or parlour meeting.

………………………………………………….the next two clauses of article 26 guarantee to a religious denomination the right to acquire and own property and to administer such property in accordance with law. The administration of its property by a religious denomination has thus been placed on a different footing from the right to manage its own affairs in matters of religion. The latter is a fundamental right which no legislature can take away, whereas the former can be regulated by laws which the legislature can validly impose.

……………………. ………… What then are matters of religion? The word “religion” has not been defined in the Constitution and it is a term which is hardly susceptible of any rigid definition.

……………………………………………….Religion is certainly a matter of faith with individuals or communities and it is not necessarily theistic. There are well known religions in India like Buddhism and Jainism which do not believe in God or in any Intelligent First Cause. A religion undoubtedly has its basis in a system of beliefs or doctrines which are regarded by those who profess that religion as conducive to their spiritual well-being, but it would not be correct to say that religion is nothing else, but a doctrine or belief. A religion may not only lay down a code of ethical rules for its followers to accept, it might prescribe rituals and observances, ceremonies and modes of worship which are regarded as integral parts of religion, and these forms and observances might extend even to matters of food and dress.

………………………………The guarantee under our Constitution not only protects the freedom of religious opinion but it protects also acts done in pursuance of a religion and this is made clear by the use of the expression ” practice of religion ”

 ……………………………………. Restrictions by the State upon free exercise of religion are permitted both under articles 25 and 26 on grounds of public order, morality and health. Clause (2)(a) of article 25 reserves the right of the State to regulate or restrict any economic, financial, political and other secular activities which may be associated with religious practice and there is a further right given to the State by sub-clause (b) under which the State can legislate for social welfare and reform even though by so doing it might interfere with religious practices. The learned Attorney-General lays stress upon clause (2) (a) of the article and his contention is that all secular activities, which may be associated with religion but do not really constitute an essential part of it, are amenable to State regulation.

…………… What article 25(2)(a) contemplates is not regulation by the State of religious practices as such, the freedom of which is guaranteed by the Constitution except when they run counter to public order, health and morality, but regulation of activities which are economic, commercial or political in their character though they are associated with religious practices………………………….

As we have already indicated, freedom of religion in our Constitution is not confined to religious beliefs only; it extends to religious practices as well subject to the restrictions which the Constitution itself has laid down. Under article 26(b), therefore, a religious denomination or organization enjoys complete autonomy in the matter of deciding as to what rites and ceremonies are essential according to the tenets of the religion they hold and no outside authority has any jurisdiction to interfere with their decision in such matters. Of course, the scale of expenses to be incurred in connection with these religious observances would be a matter of administration of property belonging to the religious denomination and can be controlled by secular authorities in accordance with any law laid down by a competent legislature; for it could not be the injunction, of any religion to destroy the institution and its endowments by incurring wasteful expenditure on rites and ceremonies. ……………………………”

Above extracts from the said decision make it very clear that constitution bestows powers on the state to regulate the administration of religious properties, income etc. Section 12A/12 AA/12AB etc. of Income Tax Act borrow powers from these 2 articles of constitution to regulate income and properties of the charitable trust. Same is the position under GST law.

Also let us look at the unambiguous powers bestowed on the state per Constitution 101^st amendment Act, per which GST Act was enacted which I am reproducing below.

STATEMENT OF OBJECTS AND REASONS:-

“The Constitution is proposed to be amended to introduce the goods and services tax for conferring concurrent taxing powers on the Union as well as the States including Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. The goods and services tax shall replace a number of indirect taxes being levied by the Union and the State Governments and is intended to remove cascading effect of taxes and provide for a common national market for goods and services. The proposed Central and State goods and services tax will be levied on all transactions involving supply of goods and services, except those which are kept out of the purview of the goods and services tax.

 a)………………………………………………………………………………………

b)………………………………………………………………………………………

c)………………………………………………………………………………………

 d) levy of Integrated Goods and Services Tax on inter-State transactions of goods and services

e)………………………………………………………………………………………

f)………………………………………………………………………………………

(g) coverage of all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax. In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy of Goods and Services Tax till a date notified on the recommendation of the Goods and Services Tax Council.”

Following reproduced are two of the articles as have been sought to be added in the constitution per clauses (2) and (9) of the aforesaid bill.

“2. After article 246 of the Constitution, the following article shall be inserted, namely:—

“246A. (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State

 After article 269 of the Constitution, the following article shall be inserted, namely:—

‘‘269A. (1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Explanation.—For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both.”

One would observe that the lis or the fulcrum of taxability under GST is specified ‘as every transaction of supply of goods and services.’

Thus reading the interpretations of Articles 25 and 26 of The constitution alongwith the aforesaid powers of taxing each and every supply of goods and services per 101^st Constitution amendment Act (Per GST Act), seem to give an impression that other than religious/spiritual practices, all of the other economic activities carried on by Religious/ charitable Trust are to be administered as per the state’s law, may be Income Tax or may be GST.

It is in the light  of above provisions that the applicability of the decision of  Commissioner Of Sales Tax vs. Sai Publication Fund on 22 March, 2002 in CASE NO.: Appeal (civil) 9445  of  1996 With Civil Appeal No. 1716 of 1999.DATE OF JUDGMENT: 22/03/2002 should be reviewed as to its applicability  under GST regime.

Therein the issue was whether the said trust can be treated as a dealer w. r. t. taxability of   books, booklets, pamphlets etc. essentially containing message of Shri Saibaba and that if it is so than can its turnover be assessed to sales tax as ancillary activity of The Trust.

The court ruled in favour of the trust on the ground that the trust was never registered to do a business as had been defined in the then existing VAT law under which a total fulcrum of taxability was on a dealer, carrying on activity of selling and buying.

So per the court when the main object of The Trust does not meet the parameters of selling and buying as a dealer, its ancillary activity of selling Shri Saibaba’s literature cannot be taxed. The additional factors considered by the court were that there was no intention to earn anything out of it and that the surplus was going to be utilized for religious /charitable purposes.

Let us examine as to per which of the  specific provisions of the then existing VAT law, the receipts on account of sale of books, DVDs etc. were considered as taxable to let us compare the same with provisions of taxability of such receipts under GST.

Excerpts from the case of Commissioner Of Sales Tax vs Sai Publication Fund:-

“the issue that arises for consideration and decision in this appeal is whether the Trust – Sai Publication Fund, which has been set up by some devotees of Saibaba of Shridi for spreading his message, can be held to be a “dealer” in respect of sale of books, booklets, pamphlets, photos, stickers and other publications containing message of Saibaba and the turnover of such publication can be assessed to sales tax under the Bombay Sales Tax Act, 1959 (for short `the Act’).’

 The relevant and material facts, leading to filing of this appeal in brief, are that the assessee (the respondent herein) is a Trust created by four devotees of Saibaba of Shridi under a trust deed dated 6.8.1984. The object of the Trust is to spread message of Saibaba of Shridi. In furtherance of and to accomplish the said object, the assessee publishes books, pamphlets and other literature containing the message of Saibaba under the aegis of “Sai Publications” which are available to the devotees of Saibaba on nominal charge to meet the cost. The sale proceeds of such publication goes to the Trust and forms part of the property of the Trust, which can be utilized only for advancement of the objects of the Trust. There is a specific provision in the trust deed that in the event of failure of the Trust to carry on its aims and objects, the remaining fund in its hands would be handed over to Sansthanam of Shridi.

At the outset, it is useful to notice few provisions of the Act to the extent they are relevant in order to appreciate the respective contentions relating to the controversy that has arisen.

“S.2(5A)- “Business” includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern and any transaction in connection with, or incidental or ancillary to, the commencement or closure of such trade, commerce, manufacture, adventure or concern;………………………. ………..”

“S.2(11):- “Dealer” means any person who whether for commission, remuneration or otherwise carries on the business of buying or selling goods in the State, and includes the Central Government, or any state Government which carries on such business, and also any society, club or other association of persons which buys goods from or sells goods to its members;…………………………………. …………………………………………………………………………… ……”

“S.2(19): “Person” includes any company or association or body of individual whether incorporated or not, and also a Hindu undivided family, a firm and a local authority.”

The contention that the Trust in question is “dealer” within the meaning of Section 2(11) read with Section 2(5A) requires careful scrutiny. As is evident from Section 2(11), every person is not “dealer” but only those persons “who carry on the business” by buying or selling goods are regarded as “dealers”. From the very definition of dealer, it follows that a person would not be a dealer in respect of the goods sold or purchased by him unless he carries on the business of buying and selling such goods. “Dealer” and “person” are separately defined in Section 2(11) and Section 2(19) of the Act respectively. “Person” means not only natural person but includes any company or association or body of individuals whether incorporated or not and also a Hindu Undivided Family, a firm or a local authority; whereas “dealer” on the other hand means only such persons who carry on the business of buying and selling of goods in the State including those who are deemed to be dealers by virtue of definition of “dealer” contained in Section 2(11) of the Act. As rightly noticed by the High Court, it is clear from charging Section 3 that every dealer, whose turnover of sale or purchase during any year exceeds the limits specified therein, is liable to payment of tax under the Act on his turnover of sales or purchases. Although the Act provides for levy of tax on the sales or purchases of certain goods in the State of Maharashtra, the levy is restricted only to sales or purchases made by dealers. As is manifest from Section 3 itself, the liability to pay sales tax is only on the dealers. From the combined reading of Section 3, 2(5A) and 2(11) of the Act, it follows that the tax under the Act is leviable on the sales or purchases of taxable goods by a dealer and not by every person. From the facts of the present case, the sole object of the assessee Trust is to spread the message of Siababa of Shridi. It is also not disputed that the books and literature etc. containing the message of Saibaba were distributed by the Trust to the devotees of Saibaba at cost price. There is no dispute that the primary and dominant activity of the Trust is to spread the message of Saibaba. This main activity does not amount to “business”. The activity of publishing and selling literature, books and other literature is obviously incidental or ancillary to the main activity of spreading message of Saibaba and not to any business as such even without profit motive and it is in a way a means to achieve the object of the Trust through which message of Saibaba is spread. It is clear from the Trust Deed and objects contained therein that it was not established with an intention of carrying on the business/occupation of selling or supplying goods. This being the position, it cannot be said that the Trust carries on the business of selling and supplying goods so as to fall within the meaning of “dealer” under Section 2(11) of the Act.

No doubt, the definition of “business” given in Section 2(5A) of the Act even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. If the main activity is not business, then any transaction incidental or ancillary would not normally amount to “business” unless an independent intention to carry on “business” in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on “business” connected with or incidental or ancillary sales will rest on the Department. Thus, if the main activity of a person is not trade, commerce etc., ordinarily incidental or ancillary activity may not come within the meaning of “business”. To put it differently, the inclusion of incidental or ancillary activity in the definition of “business” pre-supposes the existence of trade, commerce etc. The definition of “dealer” contained in Section 2(11) of the Act clearly indicates that in order to hold a person to be a “dealer”, he must `carry on business’ and then only he may also be deemed to be carrying on business in respect of transaction incidental or ancillary thereto. We have stated above that the main and dominant activity of the Trust in furtherance of its object is to spread message. Hence, such activity does not amount to “business”. Publication for the purpose of spreading message is incidental to the main activity which the Trust does not carry as business. In this view, the activity of the Trust in bringing out publications and selling them at cost price to spread message of Saibaba does not make it a dealer under Section 2(11) of the Act.

 On the facts and in the circumstances of the present case irrespective of the profit motive, it could not be said that the Trust either was “dealer” or was carrying on trade, commerce etc. The Trust is not carrying on trade, commerce etc., in the sense of occupation to be a “dealer” as its main object is to spread message of Saibaba of Shridi as already noticed above. Having regard to all aspects of the matter, the High Court was right in answering the question referred by the Tribunal in the affirmative and in favour of the respondent-assessee. We must however add here that whether a particular person is a “dealer” and whether he carries on “business”, are the matters to be decided on facts and in the circumstances of each case. For what is stated above, we answer the question set out in the beginning in the negative and in favour of the respondent- assessee and dismiss the appeal finding no merit in it but with no order as to costs…………”

The most significant aspect of ruling in favour of the trust is that, it’s not getting fitted into the then existing definition of dealer, which word was defined as the one- purchasing and selling goods. Compared to the same, GST Act has enlarged the scope of taxability in 2 ways. Firstly the criteria of taxing only (such dealer) ‘the dealer selling and purchasing goods’ is totally absent under GST and secondly supply per se has been made a taxing event per constitution without any condition or limitation. I personally feel that whenever we look at the inclusive definition of ‘Supply’ as given in Section 7 of GST Act, we should understand that the intention is to tax any supply of goods or services and that too unconditionally.

There have been catena of decisions on the aforesaid lines that if the main purpose /object /goal of the trust is religious than the sale of ornaments & jewellery gifted to god or the sale of prasadam or the sale of religious books pamphlets etc. would not be taxable because the main activity of such trusts is held as being religious and so ancillary and connected activities therewith like selling ornaments or Prasadam can not be considered as business and so such sales would not be taxable.

Following are few of the examples of such cases.

Madras High Court decision Court in the case of Tirumala Tirupati Devasthanam, Tirupati v. The State of Madras and another, (1972) 29 STC 266 (Madras).

Madras High court decision in the case of Arulmigu Dhandayuthapani Swami Thirukkoil v. Commercial Tax Officer-II, Palani, (1998) 108 STC 114.

Madras High Court decision in the case of Sri Velur Devasthanam … vs The State of Tamil Nadu on 12 November, 2011 (Revision) No.1101 of 2006.

The moot point is that, can one claim exemption w.r.t supply of religious literature, CDs, DVDs etc. on the basis of above decisions under GST regime?

Let us refer to a decision by Advance ruling Authority of Maharashtra in the case of : In re Shrimad Rajchandra Adhyatmik Satsang Sadhana Kendra (GST AAR Maharashtra) inAppeal Number : Advance Ruling NO.GST-ARA-41/2017-18/B-48 Date of Judgment/Order : 14/06/2018

In this decision, the sale proceeds of books, audio CDS, DVDs, etc. said to spread the knowledge of the ‘Jain Dharam’ was considered taxable in spite of it being a charitable trust and in spite of the fact that that the activities of the trust were being carried on without any profit motive and that there was never an intention to purchase and sell such books, DVDs, CDs etc. at a profit. Also as a matter of fact the proceeds of selling all these were to be used for furthering the charitable activities of the trust.

The reason being, in the opinion of AAR, the supply of such books, DVDs and CDS were nothing but the supply of goods in terms of various applicable provisions of The GST Act. Further, under GST Law there is no specific exemption per se w.r.t supply of goods by a charitable Trust, in contrast to the conditional exemption given to the Services rendered by a Charitable Trust.

The aforesaid ruling was confirmed by  Appellate authority of Advance Ruling Maharashtra  in Advance Ruling ORDER NO. MAH/AAAR/SS-RJ/14/2018-19, Date, 24th December, 2018 THE MAHARASHTRA APPELLATE AUTHORITY FOR ADVANCE RULING FOR GOODS AND SERVICES TAX ,

The said trust had following main activities as were submitted before the Advance Ruling Authority.

1. The Appellant is a public charitable and religious trust engaged in advancement of teachings of Paramkrupaludev Shrimad Rajchandra and spreading the knowledge of Jain Religion entrusted by Shri Mahavir Swami and other Tirthankars.
2. The main object of the Appellant trust is to spread the knowledge of the Jain Dharam and advancement of teachings of Paramkrupaludev Shrimad Rajchandra.
3. The ancillary and incidental objects of the Appellant trust are to carry out activities for advancement of main object such as satsang, shibirs, 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.

OBJECTIVES OF THE TRUST

Fundamental objectives of the Trust – Spiritual Activities

Other Objectives of the Trust:-

(1) Social Services, Public Aids and Religious Activities

 (2) Activities of spreading the knowledge

 (3) Activities for the kindness to all living beings

The arguments before AAR/AAAR were almost on the similar lines as were argued in the case of Commissioner Of Sales Tax vs Sai Publication Fund, as has been discussed above. The whole thrust of arguments in this (SRASS Kendra) case was to the effect that it is a  charitable trust with aforegiven holistic objectives and that it is not selling books/ DVD etc. for profit –neither has any intention to sell the same at a profit. So (as was contended in the case of Sai Publication Trust), it (SRSS Kendra) cannot be said to carry on the business and that the selling of books/ DVD being an ancillary activity to it could not be considered as a taxable supply under GST.

AAR /AAAR both observed that under The GST Act, supply of goods per se is taxable and that there is no specific exemption exempting supply of goods by a charitable Trust per se. In fact AAR/AAAR both referred to the exemption given w.r.t religious/charitable services, again specifying that not all of the charitable Activities/services are exempted but the exemption is for specified Charitable activities only (Religious activity described as one of the charitable activities). Before AAAR   the assessee (SRSS Kendra) objected that it never pressed for any exemption and further contended that AAR referred to the same illegally in an unauthorized way.

During the course of judgment AAR referred to the various dictionary meanings of the words trade, commerce, manufacture etc., which are reproduced herewith. In view of AAR the aforesaid activities of selling books, DVDs, CDS etc. were well covered by such definitions. Following are the observations by AAR in that regard.

“………………………………..We find that as per details above ‘business’ is defined under GST Act under Section 2(17). As per this definition we are required to have a relook at details as given under sub clause (a), (b) and (c) of Section 2(17) which states that business includes:-

(a) Any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity whether or not it is for pecuniary benefit.

(b) Any activity or transaction in connection with or incidental or ancillary to sub clause (a).

(c) Any activity or transaction in the nature of sub clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction.

In reference to the above, we find that the word ‘trade’ as per Dictionary has meanings as under:-

As a noun it means

the buying or selling of goods or services between people or countries.

a particular type of business.

As a verb it means

to buy or sell goods or services.

to exchange something for something else.

As per Collins Dictionary, ‘trade’ is an activity of buying, selling or exchanging goods or services between people, firms or countries. When people, firms or countries trade, they buy sell or exchange goods or services between themselves.

Further as per business dictionary we find that Trade is a commercial transaction involving sale and purchase of a good, service or information.

In the same way we find that Wikipedia states that Trade involves the transfer of goods or services from one person or entity to another, often in exchange for money.

Thus we find that the above are the definitions of trade as per general understanding as well as per business understanding.

In the same way the word ‘Commerce’ has several definitions which are as under:-

As a noun

It means business of buying and selling things.

As per Business Dictionary, it means exchange of goods or services for money or in kind, usually on a large scale enough to require transportation from place to place or across city, state or national boundaries.

Similarly we find that Wikipedia defines it as “exchange of goods and services, especially on a large scale.”

After that AAR reproduced the Section 7 of CGST Act, 2017 and observed as follows:-:

“ In view of the above detailed discussions it is very apparent that the applicant is engaged in Trade and Commerce by way of selling of goods and services as per detailed discussions 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…….

There is no exemption granted to charitable trusts in case of supply of goods which are taxable and are not specifically exempt or nil rated. In case of service tax exemption, a charitable trust is required to comply with below mentioned criteria:-

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

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

Under the GST Act, not all services provided by a Trust registered under Section 12AA would be termed as a charitable activity. Only the following activities are termed as charitable activity and are exempt from GST:

 Services relating to public health like:

o Care or counseling of terminally ill persons or persons with severe physical or  mental disability;

o Persons afflicted with HIV or AIDS;

o Persons addicted to a dependence-forming substance such as narcotics drugs or alcohol;

 Public awareness of preventive health, family planning or prevention of HIV infection;

 Advancement of religion, spirituality or yoga;

 Advancement of educational programs or skill development relating to:

o Abandoned, orphaned or homeless children;

o Physically or mentally abused and traumatized persons;

o Prisoners; or

o Persons over the age of 65 years residing in a rural area;

Preservation of environment including watershed, forests and wildlife.

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 services being provided by them are not covered under the definition of charitable activities.

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 Shibir/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.

Applicant has submitted different case laws mention of which is already made herein above. Since we have come to the conclusion that the activities carried on by the applicant is in the nature of business as defined u/s 2(17) of the GST Act and further considering the GST Regulations that all services provided by the religious trusts and charitable institutions are not exempt from tax and the various case laws referred by the applicant are in different context and therefore cannot be considered and relied upon in the facts of the present case.”

Above decision seems to provide a departmental view as to what activities of the trust should be considered as exempt and what not?

Conclusion: Both AAR/AAAR stick to the provisions of GST law as per their understanding and interpretations. Can one contend that their decisions do not reflect the correct applicability of GST Law, if one views from the perspective of the constitutional provisions mandating that each and every supply of goods and services is taxable under GST law unconditionally? One should note that Petroleum Products are not being taxed presently under GST net by specifically mentioning so in the act itself. Further GST on Alcohal for human consumption is specifically kept out of GST per constitution. Such is not the case of supply of goods (meaning books, DVDs, CD’s) being sold at a price by charitable/religious institutions.

Would it have made a difference if in the aforesaid matter; had assessee urged for the applicability of  exemption available for  charitable activities-Services (which was not  pressed for –rather objected to before AAR/AAAR), while pressing in the concept of Composite supply that the principal supply is the rendering of Spiritual/religious services (Which is in fact So) and that supply of books/DVDs are naturally bundled and supplied in conjunction with the supply of religious/spiritual activities/services – which are mentioned as the main      objects of the Trust ?

In other words , can one take up a plea that as the books/DVDs are supplied as ancillary supply in the course of making  principal supply/service of rendering spiritual/religious services, such books/CDs/DVD’s and religious literature should remain exempt, even if sold at a price?

It seems so.

Shouldn’t same logic apply when prasadam is sent online as a result of some Pooja performed in temple/Mandir on one’s behalf? There are monetary charges, but the same are for supplying a religious service of performing Pooja- which is an exempt service. Sending of prasadam is the conclusive part of that supply/service. This is nothing but a case of rendering religious services – a kind of composite supply in which the performance of Pooja vidhi/hymns /rituals is the principal religious supply and the supply of prasadam is an inseparable part of that supply of religious service as is so common in all of the Hindu vidhi or rituals.