Impact of GST on Charitable Trusts and NGOs

Section 2(17) of the CGST Act, 2017 provides the definition of business which includes any trade, commerce, manufacture, profession, vocation, adventure, wager, or any other similar activity, irrespective of it is for a pecuniary benefit or not.

Since pecuniary benefit is not considered and does not fall under the ambit of business. Therefore, charitable activities and activities of NGOs will also get covered under the definition of business, unless the same are exempted from GST law.

General exemptions not specific to charitable trusts are as below:

  1. Training and coaching in recreational activities
  2. Public Library
  3. Healthcare and clinical establishments

Services by an entity registered under Section 12AA of Income Tax Act, 1961 which states that the registration once granted to a trust or institution by way of ‘charitable activities’ shall remain in force till it is cancelled by Principal Commissioner. Hence, exemption is given to the charitable trusts, only if the following conditions are satisfied:

  1. Entities must be registered under Section 12AA of the Income Tax Act, 1961 and
  2. Such activities or services of the entity are by way of charitable activities

What is a charitable activity under GST?

The Goods and Services Act also specifies the criteria to be called a charitable activity. They are:

  • Public health services, such as:
  • Counselling of terminally ill persons or counselling for physically disabled
  • Counselling for people affected with HIV or AIDS
  • Counselling for alcohol-dependent persons
  • Promoting of religion, spirituality, or yoga
  • Spreading public awareness on health, family planning
  • Promoting educational programs or skill development relating to:
  • Physically or mentally abused persons
  • Prisoners
  • Orphaned, homeless, or abandoned children
  • Rural area residents over the age of 65
  • Charitable services to preserve the environment (watershed areas, forests, and wildlife)

If any charitable trust or an NGO does not meet at least two of the criteria, then GST will be applicable and the entity must register under GST. 

Activities of Charitable Trusts subject to GST

  • Training programs, yoga camps, or other programs conducted by the charitable trusts and fee charged for the participants, the same shall be considered as a commercial activity and will be liable for GST. Also, the donations received for such programs and activities are liable to pay GST.
  • The services provided in the form of training or coaching in regard to arts and culture or sports by a charitable entity are exempted from GST.
  • There is no exemption for the supply of goods by charitable trusts. Thus, any goods supplied by such charitable trusts for consideration shall be liable to GST.
  • Properties of charitable trusts which are not situated in the precincts of a religious place meaning thereby not within walls or boundary walls of the religious place, income from such letting out will lose this exemption and income from it will be liable to GST.

Services by and to Education Institutions (including institutions run by charitable trusts)

If the trust is running school for the purpose which is not covered above, income from such activity will not be exempt, but will be exempt with respect to, supply by and to educational institutions and only the following services received by eligible educational institution are exempt:

  1. Transportation provided to students staff of the educational institution.
  2. Catering service including any mid-day meals scheme sponsored by the Government.
  3. Security or cleaning or house-keeping services in such educational institution.
  4. Services relating to admission to such institution or conduct of examination.

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