Applicability of GST on Charitable and Religious Trust

Introduction

A number of services provided by charitable and religious trusts are exempt under the GST regime. Let us understand what exemptions are available to these trusts in detail.

Entry 1 of Notification 12/2017, exempts the Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities

What are the criteria for a charitable trust to be exempted from GST?

1. The charitable trust or NGO must be registered under Section 12AA of the Income Tax Act.
2. Services provided by the charitable trust or the NGO must be for a charitable purposes.
3. As income from only charitable activities is exempt, income from all other activities is taxable.

What are the types of charitable activities?

Activities relating to:

1. public health by way of:

a. care or counselling 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

b. 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

d. persons over the age of 65 years residing in a rural area

4. preservation of environment including watershed, forests and wildlife

Is GST applicable 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.

Is GST applicable 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.

What exemption is available to a religious trust?

Entry 13 of Notification 12/2017, exempts the following services:-

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

i. entity registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 or

ii. a trust or an institution registered under section 10(23C)(v) of the Income-tax Act or

iii. a body or an authority covered under clause (23BBA) of section 10(23BBA) the Income-tax Act, 1961

This exemption shall not apply to,-

i. renting of rooms where charges are atleast Rs 1,000 per day

ii. renting of premises, community halls, kalyan mandapam or open area, where charges are atleast Rs 10,000 per day

iii. renting of shops or other spaces for business or commerce where charges are atleast Rs 10,000 per month.

Let us understand this exemption a little better with the help of the table given below:-

Income by way of	Is the service exempt or taxable
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	Exempt
Letting out immovable properties (marriage hall, convention hall, rest house for pilgrims, shops) situated within the premises of a religious place owned by charitable trusts.	Exempt
Letting out immovable properties (marriage hall, convention hall, rest house for pilgrims, shops) not situated within the premises of a religious place owned by charitable trusts.	Taxable
Religious ceremony organised by a charitable trust	Exempt
Income from religious functions/poojas conducted on special occasions like religious festivals by persons authorised for this purpose by the charitable or religious trust	Exempt
Services other than by way of conduct of religious ceremony	Taxable
Letting of space to agencies for advertisement hoardings, income from such advertisement is chargeable to GST by charitable trusts	Taxable
Donation for religious ceremony is received with specific instructions to advertise the name of a donor.	Taxable
Donation for religious ceremony is received without such instructions	Exempt

Is GST applicable if a charitable trust is providing sports coaching?

Entry No.80 of Notification no.12/2017-Central Tax (Rate), provides exemption to an entity registered under Section 12AA for services provided by way of training or coaching in recreational activities relating to arts or culture or sports. Therefore, no GST will be applicable.

Is GST applicable, if charitable trust provides services of management of educational institutions?

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.

Is GST applicable on services which are imported by charitable trusts?

As per the entry no. 10 of Notification no.9/2017-Integrated Tax (Rate), if charitable trusts registered under Section 12AA of Income-tax Act receives any services from service provider located in non-taxable territory, for charitable purposes, then, such services received are not chargeable to GST under the reverse charge mechanism.

Is GST applicable on services by/to Education Institutions (including institutions run by charitable trusts)?

1. If the trust is running school for the purpose which is not covered within the scope of charitable activities, income from such activity will be exempt under entry 69 of notification no.12/2017-Central Tax (Rate).
2. Exemption is available w.r.t supply by and to educational institutions and only the following services are exempt

i. Transportation of students, faculty and staff of the eligible educational institution.

ii. Catering service including any mid-day meals scheme sponsored by the Government.

iii. Security or cleaning or house-keeping services in such educational institution.

iv. Services relating to admission to such institution or conduct of examination.

3. 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.

4. Therefore, all services received by educational institutions managed by charitable trusts (for other than charitable activities) except those services mentioned above are taxable.

Is GST applicable if a charitable trust is involved in arranging yoga and meditation camp?

1. 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.
2. 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).
3. Since donation is received for participation, it will be considered commercial activity and it will definitely be covered under the GST.

Is GST applicable if a charitable trust is involved in the running of public libraries?

1. 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.
2. This activity is specifically excluded by way of entry No. 52 of Notification No. 12/2017- Central Tax Rate (and is applicable for everyone, including charitable trusts)
3. Services by private libraries are not exempt.

Is GST applicable on income of hospitals managed by a charitable trust?

1. Entry no. 77 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.
2. All treatment, diagnosis or care for illness, injury, deformity, abnormality or pregnancy by a clinical establishment is covered under this exemption.
3. 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 are not covered under this exemption. Hence they are taxable.
4. Such healthcare services provided by doctors and paramedics either as an employee (clinical establishment) or in their individual capacity is exempt.
5. Transportation of patients to and from a clinical establishment is also exempt.
6. 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.
7. If hospitals hire visiting doctors/ specialists and 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.