GST has seen as a great tax reform to unify the entire nation, as far as taxation is concerned. This has been beneficial for various sectors, at the same time, implementation of GST will have consequences on charitable organization, Trust and Non Profit Organizations (NGO).
What is the impact of GST on trust registered under section 12aa?
Let us take a look at the impact that GST’s on NGOs and charitable trusts. There are certain criteria for a charitable trust or an NGO to be exempted from the Goods and Services Tax. The charitable trust or NGO must be registered under Section 12AA of the Income Tax Act, and the services provided by the charitable trust or the NGO must be for a charitable cause. Let us look this in details.
What is Criteria for Charitable Trust to Be Exempt from GST ?
A charitable trust or NGO must satisfy the following two criteria:
• The entity must be registered under Section 12AA of the Income Tax Act.
• 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 exempt from GST:
• Services relating to public health like:
– Care or counselling 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;
• Public awareness of preventive health, family planning or prevention of HIV infection;
• Advancement of religion, spirituality or yoga;
• Advancement of educational programmes 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;
• Preservation of environment including watershed, forests and wildlife.
Hence, if a charitable trust or NGO does not satisfy any of the two conditions, then GST would be applicable and the entity must be registered under GST.
Are services provided by Charitable Trust exempt from GST?
The question comes in every person running the charitable trust the services provided by Charitable Trust exempt from GST or Not, The answer is No (to certain extent), only charitable activities as defined above provided by a charitable trust or NGOs having 12AA registration is exempt from GST. Any other service provided by a Trust for consideration would be liable for tax under GST.
The goods sold by Charitable Trust are exempt from GST?
Answer is Yes, goods sold by a charitable trust for consideration is taxable under GST. Hence, there is no exemption for the supply of goods by charitable trusts. So, GST rate applicable for the goods normally must be paid by the charitable trust on purchases and collected on supply.
What about GST Applicability for Colleges and Universities?
The services provided by an educational institution to its students, faculty and staff are exempt from GST. And, the GST exempts the following services provided to an educational institution:
• Transportation of students, faculty and staff;
• Catering, including any mid-day meals scheme sponsored by the Government;
• Security or cleaning or housekeeping services performed in such educational institution;
• Services relating to admission to, or conduct of examination by, such institution;
Under GST, “educational institution” refers to an institution providing services by way of:
• Pre-school education and education up to higher secondary school or equivalent;
• Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;
• Education as a part of an approved vocational education course;
In addition to the exemption continuing from the erstwhile Service Tax regime, income from education is wholly exempt from GST if a charitable trust is running a school, college or education institution for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years or above residing in a rural area.
Is GST applicable on training programs, camps, and events conducted by a charitable trust?
If a charitable trust is conducting training programs, yoga camps, or other programs that are not free for participants, it will be considered as a commercial activity and hence will be liable for GST. Even the donation received for such an activity will be liable for taxation under GST. Services provided by way of training or coaching in recreational activities relating to arts and culture, or sports by a charitable entity will be exempt from GST.
Are the events organized by charitable trusts exempt from GST?
If trusts are running schools, colleges or any other educational institutions specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years or above residing in a rural area, such activities will be considered as charitable activities and income from such supplies will be wholly exempt from GST.
Though the NGO and Charitable Trust will have the Impact of GST but there are also provisions of exemptions.
This article is only for information sharing purpose, must consult with subject matter expert or CA for more clarity or before taking any GST related decision for you NGO or TRUST.
