1 Impact of GST NPO, Associations, Charitable & Religious InstitutionsRakesh Garg, LLB, FCA (Author & Consultant)

2 NPO/Charitable Insti.– Rates of TaxRate (%) Exemption under Ser. Tax Chapter 99 Services by an entity registered under section 12AA of the Income-tax Act1 by way of charitable activities. Nil Exempt – 25/2012 Entry No. 4 9963 or 9972 or 9995 or any other Heading of Section 9 Services by a person by way of- (a) conduct of any religious ceremony; (b) renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust u/s 12AA of Income-tax Act  or a trust or an institution registered u/s 10(23C)(v) of Income-tax Act or a body or an authority covered u/s 10(23BBA) of Income-tax Act: Proviso……… Exempt – 25/2012 Entry No. 5 However, proviso did not exist in Service Tax 2

3 NPO/Charitable Insti.– Rates of TaxRate (%) Taxability under Ser. Tax 9963 or 9972 or 9995 or any other Heading of Section 9 Provided that nothing contained in entry (b) of this exemption shall apply to,- (i) renting of rooms where charges are INR 1,000/- or more per day; (ii) renting of premises, community halls, kalyanmandapam or open area, and the like where charges are INR 10,000/- or more per day; (iii) renting of shops or other spaces for business or commerce where charges are INR 10,000/- or more per month. Nil Exempt – 25/2012 Entry No. 5 However, proviso did not exist in Service Tax 3

4 NPO/Charitable Insti.– Rates of TaxRate (%) Taxability under Ser. Tax 9991 Services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs, the Govt of India, under bilateral arrangement. Nil Exempt – 25/2012 Entry No. 5A 9985 Services by an organiser to any person in respect of a business exhibition held outside India. - 9999 Services provided by extra-territorial organisations and bodies 18 4

5 NPO/Charitable Insti.– Rates of TaxRate (%) Taxability under Ser. Tax 9995 Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution – (a) as a trade union; (b) for the provision of carrying out any activity which is exempt from the levy of Goods and service Tax; or (c) up to an amount of INR 5,000/- per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or residential complex. Nil Exempt – 25/2012 Entry No. 28 5

6 NPO/Charitable Insti.– Rates of TaxRate (%) Taxability under Ser. Tax Chapter 99 Services received from a provider of service located in a non- taxable territory by – (a) the Central Govt, State Govt, UT, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession; (b)   an entity registered under section 12AA of the Income-tax Act, for the purposes of providing charitable activities; or (c) a person located in a non-taxable territory: Proviso………… Nil Exempt – 25/2012 Entry No. 34 6

7 NPO/Charitable Insti.– Rates of TaxRate (%) Taxability under Ser. Tax Chapter 99 Provided that the exemption shall not apply to– (i)  online information and database access or retrieval services received by persons specified in entry (a) or entry (b); or (ii)   services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India received by persons specified in the entry. Nil Exempt – 25/2012 Entry No. 34 7

8 NPO/Charitable Insti. - Classification613 99932 Residential care services for the elderly and disabled 614 999321 Residential health-care services other than by hospitals 615 999322 Residential care services for the elderly and persons with disabilities 616 99933 Other social services with accommodation 617 999331 Residential care services for children suffering from mental retardation, mental health illnesses or substance abuse 618 999332 Other social services with accommodation for children 619 999333 Residential care services for adults suffering from mental retardation, mental health illnesses or substance abuse 620 999334 Other social services with accommodation for adults 621 99934 Social services without accommodation for the elderly and disabled 622 999341 Vocational rehabilitation services 623 999349 Other social services without accommodation for the elderly and disabled nowhere else classified 8

9 NPO/Charitable Insti. - Classification624 99935 Other social services without accommodation 625 999351 Child day-care services 626 999352 Guidance and counseling services nowhere else classified related to children 627 999353 Welfare services without accommodation 628 999359 Other social services without accommodation nowhere else classified 653 99951 Services furnished by business, employers and professional organisations Services 654 999511 Services furnished by business and employers organisations 655 999512 Services furnished by professional organisations 656 99952 Services furnished by trade unions 657 999520 9

10 NPO/Charitable Insti. - Classification658 99959 Services furnished by other membership organisations 659 999591 Religious services 660 999592 Services furnished by political organisations 661 999593 Services furnished by human rights organisations 662 999594 Cultural and recreational associations 663 999595 Services furnished by environmental advocacy groups 664 999596 Services provided by youth associations 665 999597 Other civic and social organisations 666 999598 Home owners associations 667 999599 Services provided by other membership organisations nowhere else classified 726 9999 Services provided by extraterritorial organ. and bodies 727 99990  10

11 NPO/Charitable Insti. under GSTMeaning of “person” [Sec 2(84)]…. “Person” includes,- (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Govt company as defined in sec 2(45) of the Companies Act, 2013; (i) a co-operative society registered under any law relating to co-operative societies; (l) society as defined under the Societies Registration Act, (m) trust; (n) every artificial juridical person, not falling within any of the above;

12 NPO/Charitable Insti. under GSTMeaning of “Business” [Sec 2(17)]…. “Business” includes,- (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; Supply of goods by any unincorporated association to its member [Clause 7 of Schedule II of the GST Act] Following shall be treated as supply of goods, namely:— “Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.”

13 NPO/Charitable Insti. under GSTMeaning of “charitable activities” [Sec 2(r) of Notification] “Charitable activities” means activities relating to - (i) public health by way of ,- (A) care or counselling of (I) terminally ill persons or persons with severe physical or mental disability; (II) persons afflicted with HIV or AIDS; (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, spirituality or yoga;

14 NPO/Charitable Insti. under GSTMeaning of “charitable activities” [Sec 2(r) of Notification] “Charitable activities” contd………..- (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. [Definition is same as was in Service Tax – 2(k)]

15 NPO/Charitable Insti. under GSTMeaning of “religious place” [Sec 2(zy) of Notification] “Religious place” means a place which is primarily meant for conduct of prayers or worship pertaining to a religion, meditation, or spirituality. [Definition is same as was in Service Tax – 2(zb)] Meaning of “trade union” [Sec 2(zzn) of Notification] “Trade union” has the same meaning as assigned to it in clause (h) of section 2 of the Trade Unions Act, 1926. [Definition is same as was in Service Tax – 2(zj)] Meaning of “general public” [Sec 2(zc) of Notification] “General public” means the body of people at large sufficiently defined by some common quality of public or impersonal nature; [Definition is same as was in Service Tax – 2(q)]

16 Charitable Institutions under GSTThe definition of ‘charity’ and ‘charitable’ as defined in Black’s Law Dictionary ‘Charity’ is defined as ‘aid given to the poor, the suffering or the general community for religious, educational, economic, public safety, or medical purposes’, and ‘charitable’ as ‘dedicated to a general public purpose, usually for the benefit of needy people who cannot pay for the benefits received’. Taxability of donations to a charitable organization [based upon Ser.vice Tax Education Guide Para 2.2.2] Donations to a charitable organization are not consideration unless charity is obligated to provide something in return e.g. display or advertise the name of the donor in a specified manner or such that it gives a desired advantage to the donor

17 Charitable Institutions under GSTWhether any club or association that enjoys exemption under the provisions of Income-tax Act on the ground of being a public charitable institution gets automatically excluded from levy of service tax. [based upon Circular No. 96/7/2007-ST, dated ] Exemption under the Income-tax Act on the ground of being a public charitable institution is of no consequence to levy of service tax. Levy of service tax is entirely governed by the provisions contained in the Finance Act, 1994 and the rules made thereunder. Thus, the same ratio applies to the GST also.

18 Charitable Institutions under GSTWhether donations and grants-in-aid received from different sources by a Charitable Foundation imparting free livelihood training to the poor and marginalized youth, will be treated as ‘consideration’ received for such training and subjected to GST under ‘commercial training or coaching service’. [based upon Circular no /9/2010-ST, dated ]  The important point here is regarding the presence or absence of a link between ‘consideration’ and taxable service. Unless the link or nexus between the amount and the taxable activity can be established, amount cannot be subjected to GST. Donation or grant-in-aid is not specifically meant for a person receiving such training or to the specific activity, but is in general meant for the charitable cause championed by the registered Foundation. Between the provider of donation/grant and the trainee there is no relationship other than universal humanitarian interest. In such a situation, GST is not leviable

19 Religious Institutions under GSTIs renting of precincts of a religious place taxable? [based upon Service Tax Education Guide Para 7.5.1]  Yes. However, exemption is available only if the place is meant for general public. General public is also defined as ‘body of people at large sufficiently defined by some common quality of public or impersonal nature’ Am I liable to pay tax for conducting religious ceremonies for my client? [based upon Service Tax Education Guide Para 7.5.2] No. Conduct of religious ceremonies is exempt. Religious ceremonies are life- cycle rituals including special religious poojas conducted in terms of religious texts by a person so authorized by such religious texts. Occasions like birth, marriage, and death involve elaborate religious ceremonies

20 Associations under GSTWhat is the tax liability of a RWA on the charges collected from own members by way of reimbursement of charges or share of contribution for the common use of its members in a housing society or a residential complex. [based upon Service Tax Education Guide Para ] Service of RWA to its own members up to an amount of Rs 5,000 per member per month by way of reimbursement of charges or share of contribution is exempt from tax. Where RWA is working as a pure agent of its members for sourcing of goods or services from a third person, amount collected by RWA from its members may be excluded from value of taxable value, subject to compliance with specified conditions. Liability of Group Housing Society and welfare association having taxable & exempt receipts ??? Liability of Tax Bar Associations, registered as societies, having taxable & exempt receipts ???

21 Associations under GSTI am a Resident Welfare Association (RWA). The members contribute an amount to RWA for holding camps to provide health care services to poor men and women. Am I required to pay tax on contribution received from members? [based upon Service Tax Education Guide Para ]  No. Contribution received for any activity (holding camps to provide health care services) is exempt from the levy of tax. If contribution is for carrying out an activity which is taxable, it is subject to tax. Footwear Asso. of India is organizing a business exhibition in Germany for footwear manufacturers of India. Is Footwear association of India required to pay service tax on services to footwear manufacturers? [based upon Service Tax Education Guide Para ] No. The activity is exempt from tax

22 NPO/ Insti. – Issues under GSTCharitable institutions and NPO having exempt as well as taxable income Meaning of aggregate turnover – Taxable + Exempt supplies Selling of space for advertisement in print media was exempt under service tax but now it is 5% under GST. Thus, all NGOs publishing souvenirs, receiving advertisements for souvenirs would be a taxable supply. Publishing of books – Royalty - Liable for reverse charge on royalty paid to the authors Increased GST – If used in exempt supplies – No ITC – A Cost Claiming of ITC where engaged in taxable as well as exempt supplies – Calculations

23 THANK YOU RAKESH GARG, LLB, FCA S S A R & ASSOCIATES, N. DELHI(Author of Central Sales Tax, Delhi VAT, Service Tax & GST) S S A R & ASSOCIATES, N. DELHI Ph: (011) ,