GST on NPO, Associations, Charitable & Religious Institutions with Rates

GST on NPO: Non-profit organization is an organization which has an objective of charitable purpose. Trusts, foundations, unincorporated associations and in some jurisdictions specific types of companies, may be established for a charitable purpose or may acquire such purpose after establishment. Charitable organisations are non-profit organizations; however, not all non-profit organizations are charitable organizations. Some charitable organizations may be established by companies as part of tax planning strategies.

GST on NPO, GST Rates on NPO

 GST on NPO

GST Rates on NPO / Charitable Institutions

Code   Description Rate (%) Exemption under Ser. Tax
Chapter 99 Services by an entity registered under section 12AA of the Income-tax Act1 by way of charitable activities. Nil Exempt – 25/2012  Entry No. 4
9963 or

9972 or

9995 or

any other Heading of Section 9

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 u/s 12AA of Income-tax Act  or a trust or an institution registered u/s 10(23C)(v) of Income-tax Act or a body or an authority covered u/s 10(23BBA) of Income-tax Act:

Proviso………

Nil Exempt – 25/2012  Entry No. 5 However, proviso did not exist in Service Tax
Code  Description Rate (%) Taxability under Ser. Tax
9963 or 9972 or 9995 or

any other Heading of Section 9

Provided that nothing contained in entry (b) of this exemption shall apply to,-

(i)  renting of rooms where charges are INR 1,000/- or more per day;

(ii)  renting of premises, community halls, kalyanmandapam or open area, and the like where charges are INR 10,000/-  or more per day;

(iii)  renting of shops or other spaces for business or commerce where charges are INR 10,000/- or more per month.

Nil Exempt – 25/2012  Entry No. 5 However, proviso did not exist in Service Tax
9991 Services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs, the Govt of India, under bilateral arrangement. Nil Exempt – 25/2012  Entry No. 5A
9985 Services by an organiser to any person in respect of a business exhibition held outside India. Nil  –
9999 Services provided by extra-territorial organisations and bodies 18  –
9995 Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution –

(a)  as a trade union;

(b)  for the provision of carrying out any activity which is exempt from the levy of Goods and service Tax; or

(c)  up to an amount of INR 5,000/-  per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or residential complex.

Nil Exempt – 25/2012  Entry No. 28
Chapter 99 Services received from a provider of service located in a non- taxable territory by –

(a) the Central Govt, State Govt, UT, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;

(b)   an entity registered under section 12AA of the Income-tax Act, for the purposes of providing charitable activities; or

(c) a person located in a non-taxable territory:

Proviso…………

Nil Exempt – 25/2012  Entry No. 34
Chapter 99 Provided that the exemption shall not apply to–

(i)  online information and database access or retrieval services received by persons specified in entry (a) or entry (b); or

(ii)   services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India received by persons specified in the entry.

Nil Exempt – 25/2012  Entry No. 34

Classification or HSN Codes for NPO / Charitable Inst.

613 99932 Residential care services for the elderly and disabled
614 999321 Residential health-care services other than by hospitals
615 999322 Residential care services for the elderly and persons with disabilities
616 99933 Other social services with accommodation
617 999331 Residential care services for children suffering from mental retardation, mental health illnesses or substance abuse
618 999332 Other social services with accommodation for children
619 999333 Residential care services for adults suffering from mental retardation, mental health illnesses or substance abuse
620 999334 Other social services with accommodation for adults
621 99934 Social services without accommodation for the elderly and disabled
622 999341 Vocational rehabilitation services
623 999349 Other social services without accommodation for the elderly and disabled nowhere else classified
624 99935 Other social services without accommodation
625 999351 Child day-care services
626 999352 Guidance and counseling services nowhere else classified related to children
627 999353 Welfare services without accommodation
628 999359 Other social services without accommodation nowhere else classified
653 99951 Services furnished by business, employers and professional organisations Services
654 999511 Services furnished by business and employers organisations
655 999512 Services furnished by professional organisations
656 99952 Services furnished by trade unions
657 999520 Services furnished by trade unions
658 99959 Services furnished by other membership organisations
659 999591 Religious services
660 999592 Services furnished by political organisations
661 999593 Services furnished by human rights organisations
662 999594 Cultural and recreational associations
663 999595 Services furnished by environmental advocacy groups
664 999596 Services provided by youth associations
665 999597 Other civic and social organisations
666 999598 Home owners associations
667 999599 Services provided by other membership organisations nowhere else classified
726 9999 Services provided by extraterritorial organ. and bodies
727 99990 Services provided by extraterritorial organ. and bodies

NPO / Charitable Insti. under GST

Meaning of “person” [Sec 2(84)]…. “Person” includes,-

(f)  an association of persons or a body of individuals, whether incorporated or not, in India or outside India;

(g)  any corporation established by or under any Central Act, State Act or Provincial Act or a Govt company as defined in sec 2(45) of the Companies Act, 2013;

(i)  a co-operative society registered under any law relating to co-operative societies;

(l)  society as defined under the Societies Registration Act,

(m)  trust;

(n)  every artificial juridical person, not falling within any of the above;

Meaning of “Business” [Sec 2(17)]…. “Business” includes,-

(e)  provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;

(f)  admission, for a consideration, of persons to any premises;

Supply of goods by any unincorporated association to its member [Clause 7 of Schedule II of the GST Act]

Following shall be treated as supply of goods, namely:—

  • “Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.”

Meaning of “charitable activities” [Sec 2(r) of Notification]

“Charitable activities” means activities relating to –

  1. public health by way of ,-
    1. care or counselling of
      1. terminally ill persons or persons with severe physical or mental disability;
      2. persons afflicted with HIV or AIDS;
      3. persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or
    2. public awareness of preventive health, family planning or prevention of HIV infection;
  2. advancement of religion, spirituality or yoga;
  3. advancement of educational programmes 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;
  4. preservation of environment including watershed, forests and wildlife.

[Definition is same as was in Service Tax – 2(k)]

Meaning of “religious place” [Sec 2(zy) of Notification]

“Religious place” means a place which is primarily meant for conduct of prayers or worship pertaining to a religion, meditation, or spirituality.

[Definition is same as was in Service Tax – 2(zb)]

Meaning of “trade union” [Sec 2(zzn) of Notification]

“Trade union” has the same meaning as assigned to it in clause (h) of section 2 of the Trade Unions Act, 1926.

[Definition is same as was in Service Tax – 2(zj)]

Meaning of “general public” [Sec 2(zc) of Notification]

“General public” means the body of people at large sufficiently defined by some common quality of public or impersonal nature;

[Definition is same as was in Service Tax – 2(q)]

Charitable Institutions under GST

The definition of ‘charity’ and ‘charitable’ as defined in Black’s Law Dictionary ‘Charity’ is defined as ‘aid given to the poor, the suffering or the general community for religious, educational, economic, public safety, or medical purposes’, and ‘charitable’ as ‘dedicated to a general public purpose, usually for the benefit of needy people who cannot pay for the benefits received’.
Taxability of donations to a charitable organization

[based upon Ser.vice Tax Education Guide Para 2.2.2]

Donations to a charitable organization are not consideration unless charity is obligated to provide something in return e.g. display or advertise the name of the donor in a specified manner or such that it gives a desired advantage to the donor
Whether any club or association that enjoys exemption under the provisions of Income-tax Act on the ground of being a public charitable institution gets automatically excluded from levy of service tax. [based upon Circular No. 96/7/2007-ST, dated 23-8-2007] Exemption under the Income-tax Act on the ground of being a public charitable institution is of no consequence to levy of service tax. Levy of service tax is entirely governed by the provisions contained in the Finance Act, 1994 and the rules made thereunder.

Thus, the same ratio applies to the GST also.

Whether donations and grants-in-aid received from different sources by a Charitable Foundation imparting free livelihood training to the poor and marginalized youth, will be treated as ‘consideration’ received for such training and subjected to GST under ‘commercial training or coaching service’.

[based upon Circular no. 127/9/2010-ST, dated 16-8-2010]

The important point here is regarding the presence or absence of a link between ‘consideration’ and taxable service.

Unless the link or nexus between the amount and the taxable activity can be established, amount cannot be subjected to GST. Donation or grant-in-aid is not specifically meant for a person receiving such training or to the specific activity, but is in general meant for the charitable cause championed by the registered Foundation. Between the provider of donation/grant and the trainee there is no relationship other than universal humanitarian interest. In such a situation, GST is not leviable

Religious Institutions under GST

Is renting of precincts of a religious place taxable?

[based upon Service Tax Education Guide Para 7.5.1]

Yes. However, exemption is available only if the place is meant for general public. General public is also defined as ‘body of people at large sufficiently defined by some common quality of public or impersonal nature’
Am I liable to pay tax for conducting religious ceremonies for my client?

[based upon Service Tax Education Guide Para 7.5.2]

No. Conduct of religious ceremonies is exempt. Religious ceremonies are life-cycle rituals including special religious poojas conducted in terms of religious texts by a person so authorized by such religious texts. Occasions like birth, marriage, and death involve elaborate religious ceremonies

Associations under GST

What is the tax liability of a RWA on the charges collected from own members by way of reimbursement of charges or share of contribution for the common use of its members in a housing society or a residential complex.

[based upon Service Tax Education Guide Para 7.11.8]

Service of RWA to its own members up to an amount of Rs 5,000 per member per month by way of reimbursement of charges or share of contribution is exempt from tax. Where RWA is working as a pure agent of its members for sourcing of goods or services from a third person, amount collected by RWA from its members may be excluded from value of taxable value, subject to compliance with specified conditions.
Liability of Group Housing Society and welfare association having taxable & exempt receipts ???
 Liability of Tax Bar Associations, registered as societies, having taxable & exempt receipts ???
I am a Resident Welfare Association (RWA). The members contribute an amount to RWA for holding camps to provide health care services to poor men and women. Am I required to pay tax on contribution received from members?

[based upon Service Tax Education Guide Para 7.11.9]

No. Contribution received for any activity (holding camps to provide health care services) is exempt from the levy of tax. If contribution is for carrying out an activity which is taxable, it is subject to tax.
Footwear Asso. of India is organizing a business exhibition in Germany for footwear manufacturers of India. Is Footwear association of India required to pay service tax on services to footwear manufacturers? [based upon Service Tax Education Guide Para 7.11.16] No. The activity is exempt from tax

NPO/ Institutions – Issues under GST

  • Charitable institutions and NPO having exempt as well as taxable income
  • Meaning of aggregate turnover – Taxable + Exempt supplies
  • Selling of space for advertisement in print media was exempt under service tax but now it is taxable @ 5% under GST. Thus, all NGOs publishing souvenirs, receiving advertisements for souvenirs would be a taxable supply.
  • Publishing of books – Royalty – Liable for reverse charge on royalty paid to the authors
  • Increased GST – If used in exempt supplies – No ITC – A Cost
  • Claiming of ITC where engaged in taxable as well as exempt supplies – Calculations

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