The GST implementation has been a great tax reform that has unified the entire nation, regarding taxation. This has been beneficial across several sectors. Moreover, the implementation of GST will also have social consequences on charities as well as non-profit organizations. Here, you will get to know the details about the impact that GST has on NGOs and charitable trusts.
How can an NGO be exempted from GST?
The NGO or the charitable trust has to be registered under Section 12AA of the Income Tax Act, and the services provided by them have to serve a charitable cause.
Some of the charitable activities include:
Public health services include:
- Counseling people who are very ill or counseling physically challenged individuals.
- Counseling for people who are affected by HIV or AIDS
- Counseling for those individuals who are heavily dependent on alcohol.
Religion, spirituality, or yoga services that include:
- Spreading public awareness on health, family planning, etc.
- Promoting certain educational programs or skill development programs to physically or mentally abused persons, prisoners, orphaned, homeless, or abandoned children, and rural area residents who are over the age of 65 years.
Goods sold by the charitable trusts
Goods that the charitable trusts sell are taxable. They have to pay the GST through GST Return Filing after getting GST Registration as per the rate that is applicable while purchasing the supply. Learn More:
GST on training programs, camps, and events that are conducted by a charitable trust
If a charitable trust is conducting training programs, yoga camps, or any other programs that are not free for the participants, it will be considered a commercial activity. It will therefore be liable for GST. If the NGO receives any kind of donation for such an activity, it will also be liable for taxation under GST. The services that are provided by way of training or coaching in recreational activities that are related to arts and culture, or sports by a charitable organization will be exempt from GST.
Are the events organized by charitable trusts exempt from GST?
If the trusts are running schools, colleges, or any other educational institutions specifically for the abandoned, homeless children, orphans, physically or mentally abused persons, prisoners, or persons over the age of 65 years who are residing in a rural area, these activities will be considered as charitable activities and income from such supplies will be completely exempt from GST.
Whether the amount that is received by the NGO is taxable under GST?
The money that is received by the NGO may be a gratuitous payment where there is no obligation for the NGO to provide any kind of service in return. In the absence of quid pro quo, it might also not be treated as consideration for the supply and such a receipt is not liable to GST. The critical aspect here is to see whether the donor is getting any commercial mileage out of this donation or whether it is one of the philanthropic activities.
Whether the activity is carried out for business?
GST will be levied on the NGO only if the activity is carried out for the furtherance of business. The definition of business is quite broad and this covers several activities including that of an NGO. Some of the activities that are undertaken by them might not get covered under the business ambit. If so, there will be no GST liability thereon.
One of the common misconceptions that people have about this sector is that NGOs are exempt from GST. But in reality, this understanding might not be true in all cases. The exemptions have been clearly stated in the GST law and mentioned in this article. For any further queries, feel free to consult our experts at 8881-069-069.
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