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Impact Of GST On NGOs And Charitable Trusts

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Impact Of GST On NGOs And Charitable Trusts

SocialPost Bureau

Goods and Services Tax (GST) has unified the taxation by implementing the concept of 'One Nation, One Tax.' It has replaced several taxes charged by Central and State Governments. Introduction of GST had an impact on several fields. GST has social consequences on NGOs and Charitable Trusts.

Exemption from GST

Certain Charitable Trusts or NGOs are exempted from Taxation if they are registered under Section 12AA of the Income Tax Act and further the services provided by the Charitable Trust or the NGO must be for charitable cause.

Charitable Activity

The Goods and Services Tax specifies the following criteria as Charitable Activity.

  • Activities involving Public Health Services such as Counselling the terminally ill persons or for physically disabled, counseling given to people affected by HIV or AIDS, Counseling for alcohol addicts.
  • Activities to promote religion, spirituality or yoga.
  • Spreading public awareness on Health and Family planning.
  • Promoting Educational programmes or skill development programmes to physically or mentally disabled, orphans, abandoned or homeless children or rural area residents over 65 years of age.
  • Activities to preserve the environment such as saving forests, wildlife or watersheds.

If a charitable trust or NGO doesn't involve in at least two of the above criteria, it would not be considered under the exempt category. Such trust or NGO has to register under GST.

Goods Sold by Charitable Trust:

Goods which are sold by Charitable Trusts are also liable to be taxed under GST. The Charitable Trust has to pay the GST according to the slab applicable to the products.

Training Programs, camps or Events conducted by Charitable Trusts:

If the training camps, yoga camps or any other training programmes are provided for a fee, it will be considered as a commercial activity. Therefore, GST has to be paid for such transactions. The donations received for such a program or event is also liable to be taxed under GST.

Services provided in the form of training or coaching in recreational activities such as sports, arts, and culture will be exempt from GST.

Organisations run by Charitable Trusts:

The schools, colleges or training centers run by Charitable Trust in specifically for the orphans, homeless children, abandoned, physically or mentally abused people, prisoners or people over 65 years of age from a rural area, then the organization is exempt from GST.

Property rented by Charitable trust:

Under the exemptions of the GST, renting out rooms/ building/ mandaps at a religious place by a registered Charitable Trust is exempted under the following condition:

  • If the Rent of the rooms are less than Rs 1000 per day
  • Rent of Kalyana Mandapam or open area is less than Rs 10,000 per day
  • Rent of the shops or open areas is less than Rs 10,000 per month.

Majority of the Charitable Trusts maintain the rents of rooms, Kalyana mandapas, and shops within the limit specified in GST. Therefore, the majority of the organizations providing services in religious places do not come under GST. In all other cases where the income to the Charitable Trust in the above activities cross the stipulated limit, the transaction will be counted as a commercial activity and respective tax under GST has to be paid.