The provisions relating to taxation of activities of
charitable institutions and religious trusts have been borrowed and carried
over from the erstwhile service tax provisions. All services provided by such
entities are not exempt. In fact, there are many services that are provided by
such entities which would be within the ambit of GST.
Notification No.12/2017-Central Tax (Rate) dated 28th
June 2017 exempts services provided by entity registered under Section 12AA of
the Income-tax Act, 1961 by way of charitable activities from whole of GST
videentry No. 1 of the notification, which specifies that
“ 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. Thus as per this notification, exemption is given to the
charitable trusts, only if the following conditions are satisfied.
(a)
Entities must be registered under Section
12AA of the Income-tax Act, and
(b)
Such services or activities by the entity are
by way of charitable activities.
Thus, 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:
(i)
public health by way of:
(A) care or counseling of
(I)
terminally ill persons or persons with severe
physical or mental disability;
(II)
persons afflicted with HIV or AIDS;
(III)
persons addicted to a dependence-forming
substance such as narcotics drugs or alcohol; or
(B)
public awareness of preventive health, family
planning or prevention of HIV infection;
(ii) advancement of
religion, spirituality or yoga;
(iii)
advancement of educational programs or skill development relating to:
(A)
abandoned,
orphaned or homeless children;
(B)
physically
or mentally abused and traumatized persons;
(C)
prisoners;
or
(D)
persons over the age of 65 years residing in
a rural area;
(iv)
preservation of environment including
watershed, forests and wildlife.
This notification makes the exemption to charitable
trusts available for charitable activities more specific. While the income from
only those activities listed above is exempt from GST, income from the
activities other than those 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
net. 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.
This is also borne out from the fact that in so far as
renting out of religious precincts is concerned, there is a limited exemption
available to such entities. Activities not covered by the specific exemption
would be taxable. Entry No.13 of notification no.12/2017-Central Tax (Rate)
dated 28th June, 2017, provides the following exemption to entities registered
under Section 12AA of the Income
Tax Act:
Services by a person by way of:
(a)
conduct of any religious ceremony;
(b)
renting of precincts of a religious place
meant for general public, owned or managed by an entity registered as a
charitable or religious trust under section 12AA of the Income-tax Act, 1961
(hereinafter referred to as the Income-tax Act) or a trust or an institution
registered under sub clause (v) of clause (23C) of section 10 of the Income-tax
Act or a body or an authority covered under clause (23BBA) of section 10 of the
said Income-tax Act:
Provided that nothing
contained in entry (b) of this exemption shall apply to:
(i) renting
of rooms where charges are one thousand rupees or more per day;
(ii)
renting
of premises, community halls, kalyan mandapam or open area, and the like where
charges are ten thousand rupees or more per day;
(iii)
renting of shops or other spaces for business
or commerce where charges are ten thousand rupees or more per month.
Thus, the law gives a limited exemption to
renting of only religious precincts or a religious place meant for general
public by the entity registered under Section 12AA of the Income Tax Act. As
per clause (zc) of the said notification, the term “general public” means “the
body of people at large sufficiently defined by some common quality of public
or impersonal nature”.
The term “religious place” as per the clause
(zy) of the said notification means “a place which is primarily meant for
conduct of prayers or worship pertaining to a religion, meditation, or
spirituality”. Dictionary meaning of “precincts” is an area within the walls or
perceived boundaries of a particular building or place, an enclosed or clearly
defined area of ground around a cathedral, church, temple, college, etc.
This implies that if immovable properties
owned by charitable trusts like marriage hall, convention hall, rest house for
pilgrims, shops situated within the premises of a religious place are rented
out, income from letting out of such property is wholly exempt from GST.
But if such properties are not situated in the precincts
of a religious place meaning thereby not within walls or boundary walls of the
religious place, income from such letting out will lose this exemption and
income from it will be liable to GST.
Income from a religious ceremony organised by
a charitable trust is exempt as per the above notification. So the income from
Navratri functions, other religious functions, and religious poojas conducted
on special occasions like religious festivals by persons so authorised for this
purpose by the charitable or religious trust are exempt from GST.
But a careful perusal of this exemption shows
that all income from such a religious ceremony is not exempt (services other
than by way of conduct of religious ceremony are not exempt). Therefore, the
nature of income is an essential factor for ascertaining whether it will be
taxable or exempt. If income loses its religious nature, it
is definitely chargeable to GST. For example,
if with regard to
Ganeshutsav or other
religious functions, charitable trusts rent out their space to agencies for
advertisement hoardings, income from such advertisement is chargeable to GST,
as this will be considered as income from the advertisement services. Further,
if donation for religious ceremony is received with specific instructions to
advertise the name of a donor, such donation income will be subject to GST. But
if donation for religious ceremony is received without such instructions, it
may not be subject to GST.
Similarly, entry No.80 of notification
no.12/2017-Central Tax (Rate), provides the following exemption to an entity
registered under
Section
12AA.
Services by way of training or coaching in
recreational activities relating to:
(a)
arts or culture, or
(b)
sports by charitable entities registered
under section 12AA of the Income-tax Act.
Thus, services provided by way of training or coaching in
recreational activities relating to arts or culture or sports by a charitable
entity will be exempt from GST.
GST on management of
educational institutions by charitable trusts
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.
Meaning of the word rural area defined in said
notification is rural area means the area comprised in a village as defined in
land revenue records excluding the area under any municipal committee,
municipal corporation, town area committee, cantonment board or notified area
committee or any area that may be notified as an urban area by the Central
Government or a State Government.
Import of Services
Also as per the entry no. 10 of Notification
no.9/2017-Integrated Tax (Rate) dated 28.06.2017, if charitable trusts
registered under Section 12AA of Income-tax Act receives any services from
provider of services located in non-taxable territory, for charitable purposes,
such services received are not chargeable to GST under the reverse charge
mechanism.
Services by and to Education Institutions (including
institutions run by Charitable trusts)
If the trust is running school for the purpose which is
not covered above (i.e. not coming within the scope of charitable activities as
defined in the notification), income from such activity will not be exempt
under notification no. 9/2017-Integrated Tax (Rate) or 12/2017-Central Tax
(Rate), but will be exempt under entry 66 of notification no.12/2017-Central
Tax (Rate). Entry 66 provides for exemption w.r.t supply by and to educational
institutions and only the following services received by eligible educational
institution are exempt:
(1)
Transportation of students, faculty and staff
of the eligible educational institution.
(2)
Catering service including any mid-day meals
scheme sponsored by the Government.
(3)
Security or cleaning or house-keeping
services in such educational institution.
(4)
Services relating to admission to such
institution or conduct of examination.
If such school or other educational institution gives
property owned by such institution on rent to others, no exemption will be
available for such services. Therefore, all services received by educational
institutions managed by charitable trusts (for other than charitable
activities, as defined) except those services mentioned above are taxable.
GST on arranging yoga
and meditation camp by charitable trusts
Charitable trusts organise yoga camps or other fitness
camps and they generally are not free for participants, as trusts charge some
amount from the participants in the name of accommodation or participation. If
trusts are arranging residential or non-residential yoga camps by receiving
donation or other charges from the participants, these will not be considered
charitable activities (as it is different from advancement of religion ,
spirituality or yoga).
Since donation is received for participation, it will be
considered commercial activity and it will definitely be covered under the GST.
Similarly, if charitable trusts organise fitness camps in reiki, aerobics,
etc., and receive donation from participants, such income that comes under
health and fitness services and will also be taxable.
GST on running of public libraries by charitable trusts
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. This activity is
specifically excluded by way of entry No. 50 of Notification No. 12/2017-
Central Tax Rate (and is applicable for everyone, including charitable trusts);
which means services by private libraries are not exempt. Thus, if donors of
public library remain open to all and if it caters to educational,
informational and recreational needs of its users and finance for such
libraries can be provided from donation, subscription, from special fund
created for this purpose or from combination of all such sources, it will be
called public library and no GST will be applicable on such services.
GST on hospital managed by charitable trusts
Entry
no. 74 of Notification No. 12/2017-Central Tax Rate (applicable to all persons
including charitable trusts) exempts healthcare services at clinical
establishment, an authorised medical professional or paramedics. As per clause
(zg), health care services means any service by way of diagnosis or treatment
or care for illness, injury, deformity, abnormality or pregnancy in any
recognised system of medicines in India and includes services by way of
transportation of the patient to and from a clinical establishment, but does
not include hair transplant or cosmetic or plastic surgery, except when
undertaken to restore or to reconstruct anatomy or functions of body affected
due to congenital defects, developmental abnormalities, injury or trauma.
Therefore, all treatment or diagnosis or care for illness, injury, deformity,
abnormality or pregnancy by a clinical establishment is covered. Such services
provided by doctors and paramedics either provided as an employee (clinical
establishment) or in their individual capacity is exempt. Transportation of
patients to and from a clinical establishment is also exempt. The clinical
establishment, as per clause (s),means a hospital, nursing home, clinic,
sanatorium or any other institution by, whatever name called, that offers
services or facilities requiring diagnosis or treatment or care for illness,
injury, deformity, abnormality or pregnancy in any recognised system of
medicines in India, or a place established as an independent entity or a part
of an establishment to carry out diagnostic or investigative services of
diseases.
So,
if charitable trusts run a hospital and appoint specialist doctors, nurses and
provide medical services to patients at a concessional rate, such services are
not liable to GST. If hospitals hire visiting doctors/ specialists and these
deduct some money from consultation/visit fees payable to doctors and the
agreement between hospital and consultant doctors is such that some money is
charged for providing services to doctors, there may be GST on such amount
deducted from fees paid to doctors.
GST on services provided to charitable trusts
Services provided to charitable trusts are not out of
ambit of GST.
All services other than those specifically exempted
provided to charitable trusts will be subject to GST.
GST on supply of goods by Charitable Trusts
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