Trust Registartion

[Guest]

Dear Sir,

A trust meant for social service wants to let out (temporary) its banquet and rooms for ceremonies like marriage, Satsang, seminar and social functions etc. queries are;

1. whether trust (Non profit organisation) is liable for service tax?
2.If yes, which service because this is not type of permanent let out or renting out.
3.whether any exempted service for Trust?
4.if yes then whether it is liable for reversal of CENVAT on exempted services?

[YAGAY andSUN]

Dear Kamal,

Section 66D containing Negative List (NL) is not having any specific reference to services provided by CT. Hence, services provided by CT are taxable. For the purpose of determining tax liability, one will have to refer to Notification No. 25/2012 where under various types of services have been declared exempt.

Clause No. 4 of Notification No. 25/2012 provides as follow:

Services by an entity registered under section 12AA of the Income tax Act, 1961(43 of 1961) by way of charitable activities;

As can be seen from above, exemption granted has two important conditions to be complied with viz. (i) CT should have been registered under section 12AA of Income Tax Act and (ii) the activities carried on should be charitable activities. Thus, all the activities carried on by the CT per se are not exempt. Exemption granted is restrictive.

Meaning of “charitable activities”

Clause 2(k) of Notification No. 25 / 2012 defines it as follow:

(k) “charitable activities” means activities relating to -

(i) public health by way of -

(a) care or counseling of (i) terminally ill persons or persons with severe physical or mental disability, (ii) persons afflicted with HIV or AIDS, or (iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or

(b) public awareness of preventive health, family planning or prevention of HIV infection;

(ii) advancement of religion or spirituality;

(iii) 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; or

(d) persons over the age of 65 years residing in a rural area;

(iv) preservation of environment including watershed, forests and wildlife; or

(v) advancement of any other object of general public utility up to a value of,-

(a) eighteen lakh and seventy five thousand rupees for the year 2012-13 subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during 2011-12;

(b) twenty five lakh rupees in any other financial year subject to the condition that total value of such activities had not exceeded twenty five lakhs rupees during the preceding financial year;

This is for your kind information.

Regard

YAGAY and SUN

(Management and Indirect Tax Consultants)

 

AI Summary

Charitable Trusts' Service Tax Liability: Exemptions Under Notification No. 25/2012 and Section 12AA Explained for Event Rentals. A trust involved in social services inquired about its liability for service tax when temporarily renting out its banquet and rooms for events. The response clarified that services provided by charitable trusts are generally taxable unless exempt under specific conditions. According to Notification No. 25/2012, exemptions apply if the trust is registered under section 12AA of the Income Tax Act and the activities qualify as charitable. Charitable activities include public health, religious advancement, education for disadvantaged groups, environmental preservation, and other public utilities within specified financial limits. The exemption is restrictive and not all activities are covered.