Charities will come be subject to pay Goods and Services Tax. This means that GST will be applicable on some of the services and goods supplied by a charitable trust or an NGO. Let us explain this in detail.
Criteria for a charitable trust to be exempted from GST
The charitable trust or NGO must be registered under Section 12AA of the Income Tax Act, and the services provided by the charitable trust or the NGO must be for a charitable cause.
Charitable activities under GST 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
- 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.
Goods sold by a charitable trust
Goods that are sold by a charitable trust are taxable. The charitable trust must pay the GST rate applicable while purchasing the supply.
GST applicable on training programs, camps, and events conducted by a charitable trust
If a charitable trust is conducting training programs, yoga camps, or other programs that are not free for participants, it will be considered as a commercial activity and hence will be liable for GST. Even the donation received for such an activity will be liable for taxation under GST.
Services provided by way of training or coaching in recreational activities relating to arts and culture, or sports by a charitable entity will be exempt from GST.
Events organized by charitable trusts exempt from GST
If trusts are running schools, colleges or any other educational institutions specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years or above residing in a rural area, such activities will be considered as charitable activities and income from such supplies will be wholly exempt from GST.
Charitable trust rents out a religious place:
GST law has chalked out GST exemptions, when a charitable trust rents out religious meant for general public (owned and managed by a registered charitable trust under 12AA of the Income Tax Act, 1961). GST will be exempted when:
- Rent out rooms are charged lesser than Rs.1,000 a day
- Kalyanamandapam or an open area is charged lesser than Rs.10,000 a day
- Rent out shops and other spaces for business are charged less than Rs.10,000 a month