The Goods and Services Tax (GST) was implemented in India from July 1 with the aim to unify the various tax structures running in the country. GST has benefitted most of the business industries as well as people in India, while some others are still recovering from the immediate new tax regime impacts. Meanwhile, let us take a look at the impact of GST on donations and other activities of NGOs and charitable trusts.
GST Applicability on NGOs/Charitable Trusts
As per GST regulations, the goods and services tax is applicable to some of the supplies made by a charitable trust or an NGO.
Continue reading to know the eligibility and other details about the GST on charitable trust and NGOs.
Exemption from GST
A charitable trust registered under Section 12AA of the Income Tax Act in India, providing services only for a charitable cause, is exempted from the GST.
What is a charitable cause/activity for GST purpose?
The following services/activities will be treated as a charity.
- Public health services, such as treatment of HIV/AIDS patients, alcohol-addict people, or counseling or treatment of physically disabled or terminally ill persons;
- Promotion of spirituality, religion, or yoga, including campaigns to spread public awareness on health and family planning, promotion of educational programs for physically/mentally abused people, prisoners, rural residents of 65+ age, orphaned, abandoned, or homeless children.
- Charity services relating to the protection of the environment, forest, etc.
A charitable organization or NGO must fulfil at least two of these eligibility criteria to be considered for GST exemption.
GST on supplies of goods by a charitable trust
GST at the pre-defined rate shall be applicable on the taxable supplies (sales/purchases) made by a charitable trust.
GST on training camps, events and programs held by charitable trusts
If a charitable trust is charging a fee from the candidates to attend its training program, then such fee is liable for GST. The donations received for such commercial activities are also liable for the tax.
However, GST is not applicable to services provided by charitable organizations through training or coaching in the field of arts, sports or culture.
GST on Income from charitable organizations
Income made from schools, colleges and other charitable education institutes involved in serving the physically disabled, orphans, abandoned or homeless children, mentally abused persons, prisoners, elders (65+ years age) in the rural area is also exempted from GST.
GST on renting out of religious places by a charitable trust
When a registered charitable trust rents out a religious place like a temple to be used for a public cause, it will be taxable under GST only if:
- The rent per room is more than Rs 1,000 a day
- The rent of an open area (or Kalyanmandapam) is more than Rs 10,000 a day
- The rent for shops and other business places is more than Rs 10,000 a month
Also Read: GST impact on rent
GST on Donations in India
GST is not applicable to donations made by a donor willingly to a registered charitable trust, however, any fee charged by the trust from a beneficiary in exchange for goods or services will be taxable under GST.
GST is also applicable to any donation received through a commercial trust event, where the entry or services are provided in exchange for a fee.
In short, most of the genuine charity activities and supplies are exempted from GST.