2018 (9) TMI 235 - AAR - GST

Charitable trust's paid spiritual activities including accommodation and food services constitute business under Section 2(17) CGST Act requiring GST registration

The AAR Maharashtra ruled that a charitable trust engaged in advancement of religion, spirituality or yoga constitutes 'business' under GST Acts despite ... Definition of 'business' under Section 2(17) of the CGST Act - scope of 'supply' under Section 7 of the CGST Act - registration threshold under Section 22 of the CGST Act - incidental or ancillary transactions treated as business - charitable activities exemption under notification No.12/2017 - advancement of religion, spirituality or yogaDefinition of 'business' under Section 2(17) of the CGST Act - trade and commerce as elements of business - The applicant charitable trust is engaged in business within the meaning of Section 2(17) of the CGST Act. - HELD THAT: - The Authority examined the statutory inclusive definition of 'business' and the ordinary commercial meanings of 'trade' and 'commerce.' Having considered the applicant's activities and the jurisdictional officer's material showing systematic sales of spiritual products and receipt of consideration for accommodation/food at shibirs, the Authority concluded these activities constitute buying and selling and exchange of goods and services. The trust's sale of goods and chargeable services fall within sub clauses (a), (b) and (c) of Section 2(17) and therefore amount to 'business.' The applicant's assertion that the main object is religious and that incidental sales are non commercial was considered but rejected on the facts showing regularity and consideration for supplies.Affirmed that the applicant's activities amount to 'business' as defined in Section 2(17).Incidental or ancillary transactions treated as business - definition of 'business' under Section 2(17) of the CGST Act - Sales of spiritual products incidental or ancillary to the trust's religious objectives constitute business activity under Section 2(17). - HELD THAT: - The Authority addressed the contention that incidental sales in furtherance of a charitable object should not be treated as business. On the facts, the trust undertook organised sale of books, CDs, DVDs and other articles with identifiable costing and receipts across years. Given the inclusive scope of clause (b) and (c) of Section 2(17), incidental or ancillary transactions connected with trade/commerce are captured as business activities. Precedents cited by the applicant were examined but the Authority found them distinguishable in light of the factual matrix showing commercial characteristics here.Answered in the affirmative - incidental/ancillary sales are business.Scope of 'supply' under Section 7 of the CGST Act - definition of 'business' under Section 2(17) of the CGST Act - The sale of spiritual products and chargeable services by the trust constitute 'supply' liable to GST under Section 7. - HELD THAT: - Section 7(1)(a) makes supplies made for a consideration in the course or furtherance of business subject to GST. Having determined that the trust's activities amount to business, the Authority held that organised sales of goods and provision of accommodation/food for consideration fall within the statutory scope of 'supply.' The Authority also noted that not all services by a registered charitable trust are exempt; only activities meeting the notification's definition of charitable activity are excluded. The trust's chargeable supplies therefore attract GST unless specifically exempt or nil rated.Sale of spiritual products and chargeable services are 'supply' and liable to tax under Section 7.Registration threshold under Section 22 of the CGST Act - compulsory registration where aggregate turnover exceeds threshold - The trust is liable to registration under the GST Act if its aggregate turnover in a financial year exceeds the threshold prescribed in Section 22. - HELD THAT: - Because the trust's activities amount to taxable supplies, the question of registration follows statutory provisions. Section 22 requires registration where aggregate turnover of taxable supplies exceeds the prescribed limit. The Authority therefore held that the trust must be registered if its aggregate turnover of taxable supplies in a financial year exceeds the threshold; compulsory registration provisions (e.g., inter state supplies, reverse charge) also apply as per the statute.Affirmative - registration required if aggregate taxable turnover exceeds the statutory limit under Section 22.Final Conclusion: The Authority ruled that the trust's organised sale of spiritual products and provision of chargeable accommodation/food constitute business and taxable supplies under the GST Act; accordingly the trust is liable for GST on such supplies and must obtain registration if its aggregate taxable turnover exceeds the statutory threshold. Issues Involved:1. Determination of whether a charitable trust engaged in the advancement of religion, spirituality, or yoga can be considered as conducting business under the GST Act.2. Liability of the charitable trust to register under the GST Act.3. Classification of the sale of spiritual products as a business activity under the GST Act.4. Determination of whether the sale of spiritual products constitutes a supply under the GST Act, thereby attracting GST.Issue-Wise Detailed Analysis:1. Charitable Trust as Business:The applicant, a religious charitable trust, contended that its primary objective is the advancement of religion and spirituality, not business. The trust argued that activities such as selling spiritual products are incidental to its main charitable objectives and do not constitute business as defined under Section 2(17) of the CGST Act, 2017. However, the judgment clarified that the definition of 'business' under the GST Act includes any trade, commerce, or similar activity, irrespective of profit motives. The trust's activities, including the sale of spiritual products, were deemed to fall under this definition, thereby classifying the trust as engaging in business.2. Liability to Register under GST:The trust argued against the necessity for GST registration, asserting that it does not engage in taxable business activities. The judgment, however, noted that the trust's aggregate turnover from the sale of goods and services, including accommodation and food provided during Shibirs/Satsangs, exceeded the prescribed threshold under Section 22 of the GST Act. Consequently, the trust was held liable to register under the GST Act, provided its aggregate turnover in a financial year surpasses the specified limit.3. Sale of Spiritual Products as Business:The trust maintained that selling spiritual products like books, CDs, and DVDs is ancillary to its main charitable purpose and should not be classified as business. The judgment referred to the inclusive definition of 'business' under Section 2(17) of the GST Act, which encompasses ancillary activities. The sale of spiritual products was determined to be incidental to the trust's primary objectives but still constituted business activities under the GST Act.4. Sale of Spiritual Products as Supply:The trust argued that its activities do not amount to 'supply' under Section 7 of the GST Act, which defines supply as transactions made in the course or furtherance of business. The judgment concluded that the sale of spiritual products by the trust qualifies as 'supply' under the GST Act, as these transactions are conducted in the course or furtherance of business. Therefore, such sales attract GST.Conclusion:The judgment affirmed that the charitable trust's activities, including the sale of spiritual products and provision of accommodation and food during events, constitute business under the GST Act. The trust is liable to register under the GST Act if its aggregate turnover exceeds the prescribed limit. The sale of spiritual products is considered a supply, attracting GST. The judgment was delivered collectively without separate opinions from individual judges.