Nov 132018

Exemptions for charitable trust : GST

Exemptions available to charitable trust:

Exemption from Section / NN Summary of exemption
Income Tax Section 11 and Section 13 Complete exemption of income from tax net
GST NN 12/2017 Central Tax (Rate)

NN 9/2017 Integrated Tax (Rate)

Specific exemption:

1.     Health services

2.     Educational services

3.     Religious services

General exemption:

services by an entity registered under Section 12AA of the Income-tax Act, 1961 by way of charitable activities

Here an attempt being made to combined study the effect to above exemption:

  1. Since Under GST only registration under income tax enough to avail the benefit of exemption and in income tax act registration under section 12AA clubbed with certain other condition are critical requirement to avail total exemption. Hence there may be situation where income of charitable trust is taxed with no GST is payable by them.
  2. Charitable organization prior to 01/04/1997 is registered under section 12A of income tax act and hence such organization may face problem in availing exemption under GST regime.
  3. Since income tax provide exemption on assessment year basis, i.e., situation that exist at the end of relevant previous year and GST levy based on situation exist at the time of supply of services and hence there may be situation where in the same year exemption is available in GST but no exemption in income tax and vise versa. Such situation will occur on 1st year of registration or year of cancellation of registration under income tax act.
  4. Under GST regime a charitable organization should involved in charitable activity. That means a trust registered under section 12AA of income act must also engaged in charitable activities as specified in GST regime. Thus, coverage of organization under GST regime is restrictive and full of various open ended and undefined terms.

The effect of above it may be concluded that while a trust is availing benefit of income tax exemption may not avail benefit of GST exemption in certain cases. The relevant clauses are reproduce below for the sake of comparison:

Charitable activities under GST:

GST Exemption Notification in para 2 (r) defines “charitable activities” to mean activities relating to –

  • public health by way of ,-
    • care or counselling of
      • terminally ill persons or persons with severe physical or mental disability;
      • persons afflicted with HIV or AIDS; (III)persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or
    • public awareness of preventive health, family planning or prevention of HIV infection;
  • advancement of religion , spirituality or yoga
  • advancement of educational programmes or skill development relating to,-
  • abandoned, orphaned or homeless children;
  • physically or mentally abused and traumatized persons;
  • prisoners; or
  • persons over the age of 65 years residing in a rural area;
  • preservation of environment including watershed, forests and wildlife.