Applicability of GST on Trust, Societies, Sec 8 Company NGOs; Charitable Activities as per GST Dept

Summary

In this video, the presenter discusses the application of GST laws for registered NGOs, Trusts, Societies, and Section 8 companies in India. The common misconception that charitable organizations are exempt from GST is debunked. The video explains that NGOs must charge GST on certain activities, even if they provide services at a minimal cost. It highlights the conditions under which GST exemptions apply, such as for specific charitable activities like public health, education, and environmental preservation. Additionally, the video covers GST obligations related to property rentals and incidental commercial activities, emphasizing compliance for organizations with turnover exceeding ₹20 lakhs.

Takeaways

• 😀 NGOs, trusts, societies, and section 8 companies are not exempt from GST simply because they are registered and engaged in charitable activities. GST applies to them as it would to any commercial enterprise.
• 😀 If an NGO provides services for free to its beneficiaries, it does not need to charge GST. However, if any consideration (even at a reduced rate) is collected, GST must be charged and deposited with the government.
• 😀 GST exemptions are limited and specific. NGOs must follow the GST rules, including the requirement to charge and collect GST when they provide certain services for a fee.
• 😀 A donation made by a company to an NGO with certain conditions (e.g., displaying the company's name on an ambulance) may no longer be considered a pure donation, but an advertisement service, attracting GST.
• 😀 To claim GST exemptions, NGOs must have a valid Section 12AB registration certificate from the Income Tax Department. This certification is the foundation for GST exemptions for charitable activities.
• 😀 Charitable activities recognized by the GST Department include public health services (like care and counseling for people with specific health issues), public awareness on health topics, education programs, and environmental preservation.
• 😀 Educational programs or skill development provided to specific groups of people (e.g., abused, disabled, or elderly individuals) qualify as charitable activities under GST and are exempt from GST if no fees are collected.
• 😀 Renting properties like auditoriums, banquet halls, or shops owned by an NGO may attract GST if the rental income exceeds a threshold (e.g., ₹10,000 per day). Such rental activities are not considered charitable under GST rules.
• 😀 If the rent for any space is ₹10,000 or more per day, GST must be charged on the rental income. If the rent is below this threshold, GST exemptions may apply, provided it aligns with the law.
• 😀 GST exemptions do not apply to room rents or property rentals above ₹1,000 per day, even if the property is part of a religious or charitable organization.
• 😀 NGOs must regularly evaluate their activities to determine when they need to comply with GST regulations. This includes reviewing incidental activities like renting out property or charging fees for services.

Q & A

What is the key message of this video regarding GST for registered NGOs, trusts, societies, and Section 8 companies?

The video emphasizes that despite being registered as an NGO or trust, such organizations are not exempt from GST. They must charge and collect GST on certain activities, especially when receiving any form of consideration for their services or products.

Is there a blanket exemption from GST for charitable activities of registered NGOs?

No, there is no blanket exemption for NGOs or charitable organizations under GST law. While some charitable activities may be exempt, the scope is very specific, and GST applies to many activities unless explicitly exempted.

What kind of activities are considered charitable under GST law?

Under GST law, charitable activities include public health services (such as care and counseling for people with disabilities or HIV), public awareness on health, education, and skill development programs for marginalized groups, and environmental preservation efforts.

If an NGO receives donations, does it always have to pay GST on these donations?

No, donations are generally not subject to GST. However, if the donation is tied to a quid pro quo arrangement (such as branding in exchange for a donation), GST may apply as it becomes a taxable transaction rather than a simple donation.

What are the exemptions for GST on rental income from property owned by NGOs?

There are exemptions for rental income from property if the rent is below certain thresholds (₹10,000 per day or ₹10,000 per month). However, if the rental income exceeds these limits, GST must be charged and collected.

What conditions must an NGO meet to claim GST exemptions?

To claim GST exemptions, an NGO must be registered under Section 12AB of the Income Tax Act. This registration validates their status as a charitable entity and makes them eligible for specific GST exemptions.

When does an NGO need to register for GST?

An NGO needs to register for GST if its annual turnover exceeds ₹20 lakh. In such cases, they must charge GST on applicable activities and file regular returns.

Can an NGO avoid charging GST on services if they provide them free of cost?

Yes, if an NGO provides services entirely free of charge and does not receive any form of consideration (monetary or otherwise), GST is not applicable. However, if even a nominal amount is charged, GST will apply.

How does GST apply to educational and skill development programs run by NGOs?

GST exemptions apply to educational programs and skill development activities only when they target specific vulnerable groups (such as the elderly, prisoners, or people with physical or mental disabilities). Providing these programs to the general public may attract GST.

What is the impact of GST on renting out auditoriums or halls by an NGO?

If an NGO rents out an auditorium, hall, or any property for ₹10,000 or more per day, GST must be charged on the rental income. If the rental is below this threshold, it may be exempt from GST.