18% GST Liability to Charitable Organizations Receiving Grants & Non-philanthropic Donations
Maharashtra Authority for Advance Ruling in Re Jayshankar Gramin Va Adivasi Vikas Sanstha -Advance Ruling No. GST-ARA-97/2019-20/B-91- ruled that charitable trusts were liable to pay 18% GST on grants and non-philanthropic donations.
The bench consisting of Shri Ravi Magoo, Additional Commissioner of Central Tax and Shri T R Ramani, Joint Commissioner of State Tax held:
In case of donations, if the gift or donation is made to a charitable organization; the payment has the character of gift or donation and the purpose is philanthropic (i.e. it leads to no commercial gain) and not advertisement, then GST is not leviable. In all other cases GST is leviable.
GST would be charged @18% (CGST 9% and SGST/UTGST 9%/IGST 18%).
The applicant, registered under Maharashtra Public Charitable Trust Act, 1950, the Societies Act, and also under Income Tax Act, 1961 as a Charitable Trust works for the welfare of 50 orphans and homeless children by way of offering them shelter, education, guidance, clothing, food, and health. The Women and Child Welfare Department, Government of Maharashtra supports the Trust by way of paying a monthly sum of Rs. 2,000/ per child. Other additional expenses for children are met through various donations. The applicant stated that the major source of income of the trust was from the Central Government through grants Women and Child Welfare Ministry.
The applicant had approached the Authority under section 97 of the Central Goods and Service Tax Act, 2017 and the Maharashtra Goods and Service Tax, 2017 seeking clarity on whether it is liable to pay GST on the amounts received in the form of donations/grants from various entities, including the Central and State governments.
The queries under consideration of the Bench were:
- Whether applicant is required to obtain registration under the Maharashtra Goods and Service Act, 2017?
- Whether the applicant is liable to pay GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government?
- What will the rate at which the GST would be charged?
The jurisdictional officer contended that along with tending to 50 orphans and children, the Trust is also serving destitute women who are litigating divorce, are homeless or are the victims of domestic violence. The officer further argued that these services were being provided at Sangamner, Dist. Ahmednagar, as the Trust was authorized to provide such services in Nashik Jurisdiction only. The officer continued to assert that as per the details submitted, the activities carried out by the applicant were not specifically covered under the exemption notification serial no. l, chapter 99 of Notification No. 12/2017 C.T.(R) dated 28.06.2017 . Consequently, although the Trust was registered under section 12AA of Income-tax Act, 1961(43 of 1961) by way of charitable activities, its activities were not covered under the said notification.
The authority stated:
The applicant has nowhere mentioned that their activity particularly pertains to advancement of educational programmes or skill development only to abandoned, orphaned or homeless children. They also perform other activities for the homeless children such as shelter, guidance, clothing, food and health. We are bound by the definition of the term ‘charitable activities’ as defined under the above said notification and are of the opinion that the applicant is not performing ‘charitable activities’, strictly according to the definition mentioned above.
Accordingly, studying the contentions, the authority answered each query raised and ruled that the applicant was required to obtain registration under the Maharashtra Goods and Service Act, 2017, the applicant was liable to pay GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government and finally that the GST would be charged at 18%, SGST/UTGST at 9%/ and at IGST 18% .
Rasmita Behera | Research Intern | EduLegaL
Swapna Iyer | Legal Editor | EduLegaL