GST on Charitable and Religious Trust

The provisions of taxation of Charitable and Religious Trust are similar to the provisions as were in the Service Tax. There are some activities by charitable trust which are non-taxable. Also there are some activities that are taxable. Today in this article we will discuss the topic of GST on charitable and religious trust. So let’s start.

Table of Contents

GST on Charitable and Religious Trusts- Applicable or Not? 

Under any tax law, taxability of any particular thing is determined on basis of definitions in the law. The definitions of the terms- Business, Consideration, Taxable Person, and Supply are relevant for determining taxation under GST. However, on reading them together one will conclude, that the supplies by a charitable trust are taxable.

However, this defeats the very purpose of a charitable or religious trust. So, just like Service Tax Act government gave specific notifications to give exemptions to the supplies/services given by a charitable trust. Now, let us discuss these notifications.

Categories of services provided by Charitable and Religious Trusts

The notification no.12/2017-Central Tax (Rate) dated 28th June, 2017 was announced. According to it “Services by an entity registered under Section 12AA of Income Tax Act, 1961 by way of “charitable activities” are exempt from whole of the GST. The definition of “Charitable Activities” is as follows:-

  1. Public Health
  2. Advancement of Religion, Spirituality or Yoga
  3. Advancement of Educational Programs or Skill development
  4. Preservation of Environment including watershed, forests and wildlife.

Now, the notification also clarifies that all services provided by these trusts are not exempt. Now, we will understand that what the taxable and non-taxable services by these trusts are.

Pre-Requisites for getting exemption from GST

As per notification the services supplied by a religious or charitable trust will be exempt only if-

  • The trust is registered under section 12AA of the Income-Tax Act.
  • Services or activities by the entity by way of charitable activities are listed in the notification.

So, services other than those satisfying the above conditions will be taxable. Now, let us what are the various taxable and non-taxable services for charitable and religious trust. 

Taxable and Non-Taxable Services/Supplies on the basis of type of organization

We have discussed the broad categories of the services provided by Charitable and Religious Trusts. Now, let us see under these categories what services will be taxable and what will be non-taxable. Please understand that the list discussed may not be exhaustive but contains the most common transactions by these type of trusts-

Category of Supply Non-Taxable Supply Taxable Supply
Public health 1. Care and counselling of

  • Terminally ill persons with severe physical or mental disability.
  • Persons affected with    HIV/AIDS
  • Persons addicted to drugs or alcohol 

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

3. Following are also exempt-

  • Health care services by a clinical establishment.
  • Authorised medical professional or paramedics.
  • Services for transportation of a patient in ambulance.
  1. Receipts from renting of shops, auditorium etc. on rent.
  2. Supplying foods and beverages, lodging to attendants.
  3. Services other than those specifically exempt.
Religion, Spirituality or Yoga 1. Conducting a religious ceremony.

2. Renting of precincts for general public.

  • For Rooms- Rental should be less than Rs.1000/day.
  • For Halls etc. –  Rental should be less than Rs.1000/day
  • For Shops etc. – Rental should be less than Rs.10, 000/month.

3. Arranging Yoga and meditation camps. Fees for the same will be exempt.

1. Where rent received for-

  • Rooms exceeds Rs.1000 per day
  • Halls exceeds Rs.10000 per day
  • Shops exceeds Rs.10, 000 per month.

2. Collection of parking charges.

3. Money taken for allowing advertisements on the premises.

4. Activities of holding fitness camps, aerobics etc.

5. Any other services other than specifically exempt.

Educational program and Skill Development 1. Providing education or skill development to 

  • Abandoned, orphaned or homeless children.
  • Physically or mentally abused or traumatized persons.
  • Prisoners.
  • Persons aged 65 years and above residing in a rural area.

2. Services like training, dance, music, painting, literary activities drama etc.

3. No GST applicable on activities of public libraries.

Services other than specifically exempt
Preservation of Environment including watershed, forests and wildlife Activities carried out for preservation of environment. This includes the preservation of watershed, forests and wildlife. Services other than specifically exempt

GST on Charitable and Religious Trusts-Other Relevant Points

Now, in this part we will discuss certain other aspects of GST on charitable and religious trusts-

  • Import of Services As per notification, a charitable trust need not pay GST under Reverse Charge Mechanism for imports. However, such import should be for purpose of providing charitable activities.

The tax however will be applicable in OIDAR services. OIDAR stands foronline information and database access or retrieval services. However, compliance is not on charitable trust.

  • GST on services provided to Charitable/Religious Trust-   Unless covered under any specific exemption, all services provided to Charitable Trust will be liable to tax.
  • GST on supply of goods by Charitable/Religious Trust-  All goods ,other than those specifically exempt, supplied by a charitable trust in exchange of consideration even a donation are liable to tax.
  • Services by and to Educational Institutions- Services provided by an educational institution to its students, faculty and staff are exempt. Following services if provided to an educational institute are exempt-
  • Transportation of students, faculty or staff.
  • Catering service including any mid-day meal scheme sponsored by the government.
  • Security or cleaning or house-keeping services in such educational institutions.
  • Services relating to admission to such institution or examination.

For this purpose, educational institution means the institution that provides following services-

  • Pre-School education and education up to higher secondary or equivalent.
  • Education for an approved vocational course or for obtaining a qualification recognized by any law.

    Conclusion

    In above article we discussed GST on Charitable and Religious Trusts. The crux of the above provisions is that exemption or relaxation is given only for primary activities of Charitable/Religious Trusts. The activities that are ancillary to these primary activities are brought under the ambit of tax. In practical scenario, applying these provisions becomes difficult sometimes. In case of doubts or queries please get in touch with our team.

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    CA Vimal Kumar Sharma has expertise is in the field of Accounting, Budgeting, Management Reporting, Statutory Reporting, Regulatory Compliance, Working Capital Management, Taxation, Statutory and Tax Audit and posses experience of almost 5 years.

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