2019 (10) TMI 1137 - AAR - GST

Adoption fees exempt from GST under charitable activities - AAR ruling

The AAR concluded that the activities conducted by The Children of the World (India) Trust are 'Charitable Activities' exempted under Notification No. ... Service of facilitating adoption - charitable activities - advancement of educational programmes or skill development relating to abandoned, orphaned or homeless children - scope of supply - consideration - exemption under Notification No.12/2017-C.T. (Rate)Scope of supply - service of facilitating adoption - consideration - Whether the activities carried out by the Trust fall within the ambit of GST as supply/business - HELD THAT: - The Authority examined definitions of 'business', 'supply' and 'consideration' under the CGST/SGST framework and the regulatory regime under the JJ Act and Adoption Regulations. Although the Trust is regulated as a Specialized Adoption Agency and performs statutory, welfare functions, the Authority found that the Trust provides services including shelter, care, education and, importantly, facilitation of adoption. The prescribed adoption fee received from prospective adoptive parents was held to be a form of consideration for the facilitation services rendered by the Trust. Consequently the essential elements of supply - a service rendered for consideration in the course or furtherance of activity covered by the Act - are present and the activities fall within the scope of GST.The Trust's activities are covered by the CGST/SGST Act as supply of services (including facilitation of adoption) and amount received as adoption fees amounts to consideration.Charitable activities - advancement of educational programmes or skill development relating to abandoned, orphaned or homeless children - exemption under Notification No.12/2017-C.T. (Rate) - Whether the Trust's activities and the adoption fees are exempt under Notification No.12/2017-C.T. (Rate) dated 28.06.2017 as amended - HELD THAT: - Having held that the activities fall within the GST net, the Authority next applied the exemption notification. The Trust is registered under section 12AA of the Income Tax Act and operates as a Specialized Adoption Agency providing shelter, food, health care, basic education and skill development to abandoned, orphaned or homeless children until adoption, under statutory prescriptions of the JJ Act and Adoption Regulations. Those activities fall within the entry for advancement of educational programmes or skill development relating to abandoned, orphaned or homeless children in Sr. No.1 of Notification No.12/2017-C.T. (Rate). The adoption fee collected by the Trust is fixed under the Adoption Regulations and used for child care purposes. Accordingly, the Authority concluded that the activities and the adoption fees are exempt under the stated notification.The activities of the Trust constitute exempt charitable activities under Notification No.12/2017-C.T. (Rate) and the adoption fees received are exempt from GST.Final Conclusion: The Authority rules that, although the Trust's activities constitute supply of services (including facilitation of adoption) within the scope of the GST Acts, those activities - being charitable and including advancement of educational programmes or skill development relating to abandoned, orphaned or homeless children - are exempt under Notification No.12/2017-C.T. (Rate) and the adoption fees received by the Trust are exempt from GST. Issues Involved:1. Whether the activities conducted by The Children of the World (India) Trust are 'Charitable Activities' exempted under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended.2. Whether the receipt of the Adoption Fees paid under Regulation 46 of the Adoption Regulations, 2017 by the Prospective Adoptive Parents to the Trust is exempted from the levy of Goods and Services Tax.Issue-wise Detailed Analysis:1. Charitable Activities Exemption:The applicant, The Children of the World (India) Trust, is a non-political Charitable Trust established under an Indenture of Trust dated 29.03.1982. The Trust is registered under Section 12AA of the Income Tax Act, 1961, and operates a shelter named 'Vishwa Balak Kendra' providing care for abandoned, orphaned, or homeless children. The Trust is recognized as a Specialized Adoption Agency (SAA) under Section 41 of the Juvenile Justice (Care and Protection of Children) Act, 2015 (JJ Act) and the Juvenile Justice (Care and Protection of Children) Model Rules, 2016 (JJ Rules). The Trust's activities include providing shelter, food, clothing, healthcare, foster care, and basic education to children until they are adopted. These activities are strictly regulated by the Government through the Central Adoption Resource Agency (CARA).The applicant argued that their activities are charitable in nature, as they provide advancement of educational programmes and skill development for abandoned, orphaned, or homeless children, which falls under the definition of 'charitable activities' as per Notification No. 12/2017-Central Tax (Rate). The Authority for Advance Ruling (AAR) observed that the applicant's activities align with the definition of charitable activities under the said notification and are thus exempt from GST.2. Exemption of Adoption Fees from GST:The applicant receives adoption fees from prospective adoptive parents as prescribed under Regulation 46 of the Adoption Regulations, 2017. The fees are INR 40,000 for intra-country adoption and USD 5,000 for inter-country adoption. The applicant argued that these fees are not consideration for any services rendered but are partial reimbursements of expenses incurred for the care and protection of children.The AAR examined whether the receipt of adoption fees constitutes a taxable supply under GST. It was determined that the applicant is providing a service of facilitating adoption and receiving consideration in the form of adoption fees. However, since the applicant's activities are charitable and include the advancement of educational programmes and skill development for abandoned, orphaned, or homeless children, they fall under the exemption provided in Notification No. 12/2017-Central Tax (Rate).Conclusion:The AAR concluded that the activities conducted by The Children of the World (India) Trust are 'Charitable Activities' exempted under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended. Consequently, the receipt of the adoption fees paid under Regulation 46 of the Adoption Regulations, 2017 by the prospective adoptive parents to the Trust is also exempted from the levy of Goods and Services Tax.