2021 (11) TMI 397 - AAR - GST

Tax Implications for Charitable Trusts under GST Law

In Re: M/s. Jayshankar Gramin Va Adivasi Vikas Sanstha

In Re: M/s. Jayshankar Gramin Va Adivasi Vikas Sanstha - 2022 (57) G.S.T.L. 148 (A. A. R. - GST - Mah.) Issues Involved:1. Requirement of registration under the Maharashtra Goods and Service Tax Act, 2017.2. Liability to pay GST on amounts received as Donations/Grants from various entities including Central Government and State Government.3. Rate of GST applicable if liable to pay GST.Issue-wise Detailed Analysis:1. Requirement of Registration under the Maharashtra Goods and Service Tax Act, 2017:The applicant, a charitable trust registered under multiple acts including the Maharashtra Public Charitable Trust Act, 1950, and the Income Tax Act, 1961, sought clarification on whether it needs to register under the MGST Act, 2017. The trust provides services to orphans, homeless children, and destitute women, funded by government grants and public donations. The applicant argued that their activities are exempt from GST under Notification No. 12/2017, which exempts services by entities registered under Section 12AA of the Income Tax Act, 1961, by way of charitable activities.The authority observed that the applicant’s activities did not strictly fall under the definition of 'charitable activities' as per the notification, which includes specific activities such as advancement of educational programmes or skill development for abandoned, orphaned, or homeless children, and care or counseling of certain disadvantaged groups. The applicant's services, including shelter, education, guidance, clothing, food, and health, were not exclusively for educational or skill development purposes. Therefore, the applicant is required to obtain registration under the GST Act.2. Liability to Pay GST on Donations/Grants:The applicant questioned whether GST is applicable on amounts received as donations or grants. The authority referred to the definition of 'supply' under Section 7 of the GST Act and 'consideration' under Section 2(31), which includes grants but excludes subsidies given by the government. The authority concluded that since the applicant's activities do not qualify as charitable activities under the GST exemption notification, the grants received are considered as consideration for the supply of services and are thus taxable.Regarding donations, the authority referenced Circular No. 116/35/2019-GST, which clarifies that donations or gifts are not taxable if they are philanthropic, not aimed at advertising the donor's business, and lead to no commercial gain. Therefore, donations that meet these criteria are not subject to GST, but other donations are taxable.3. Rate of GST Applicable:The applicant sought clarification on the GST rate applicable if their activities are taxable. The authority classified the services provided by the applicant under Service Accounting Code (SAC) 9993, which covers Human Health and Social Care Services. Specifically, services to orphans and homeless children were classified under SAC 999332, and services to destitute women were classified under SAC 999334. Both categories attract GST at 18% (CGST 9% and SGST/UTGST 9%/IGST 18%) as per Notification No. 11/2017.Order:1. The applicant is required to obtain registration under the Maharashtra Goods and Service Tax Act, 2017.2. The applicant is liable to pay GST on grants received. Donations are exempt from GST if they are philanthropic, lead to no commercial gain, and are not aimed at advertising the donor's business.3. The applicable GST rate is 18% (CGST 9% and SGST/UTGST 9%/IGST 18%).This comprehensive analysis addresses all the issues raised in the judgment, maintaining the legal terminology and significant phrases from the original text.