Services provided by Charitable Trusts not exempted under GST, Tax payable on Sale of Spiritual Products: AAR [Read Order]

Spiritual Products - Taxscan

The Authority for Advance Ruling (AAR), Maharashtra has clarified that the activity of imparting yoga is not exempted under the Goods and Services Tax (GST) regime as the same constitute “business”. The Authority also clarified that GST is payable on the supply of spiritual products by the Trust as the services provided by the Charitable and religious trusts are not specifically exempted under the new tax regime.

The applicant, a Charitable Trust engaged in the field of spreading the knowledge of Jain Dharam and advancement of teachings of Param krupaludev Shrimad Rajchandra. It generates income from sale of goods, provides for accommodation and foods in various Shibir/Satsang on payment/chargeable basis. It organize Shibir/Satsang for participant and they are not free for the participants, as the trust charge some amount from the participants in the name of accommodation or participation. Satsang is the only activity provided by the applicant free of cost to the participant.

The applicant approached the Advance Ruling Authority for a clarification on the taxability of its activities.

The authority held that the activities carried on by the applicant is in the nature of business as defined under section 2(17) of the GST Act and further considering the GST Regulations that all services provided by the religious trusts and charitable institutions are not exempt from tax.

“There is no exemption granted to charitable trusts in case of supply of goods which are taxable and are not specifically exempt or nil rated,” it said.

The authority found that though the applicant is registered under Section 12AA of the Income Tax Act, the activities being undertaken by the applicant in respect of services being provided by them are not covered under the definition of charitable activities.

“The arranging residential or non-residential Satsang /Shibir/yoga camps by accepting/charging some amount from the participants will not be covered under “charitable activities” within the meaning of definition provided at Definitions at 2 (r) of notification No. 12/2017 Central Tax (Rate) dated 28/06/2017 of the expression charitable activities and in particular advancement of religion, spirituality or yoga,” the authority said.

While Speaking to Taxscan, S. Jaikumar Country Head, Swamy Associates said that, “Almighty for Advance Ruling – The fact that the applicant is a “trust” registered under Sec 12AA of the Income Tax Act remains undisputed. Also its emerging from the facts that the “trust” is engaged in advancement of religion, spirituality and yoga. I am able to understand that the goods supplied by the “trust” has to be considered under the purview of GST if the same exceeds the threshold, as there is no specific exemption to goods supplied by a Charitable trust. But, with respect to the spiritual services, namely yoga, satsung etc, there is a clear exemption under sl. no 1 of Notification 12/2017-CT(R) and the term “charitable activities” is clearly defined under clause (r) of Notification 12/2017-CT(R) to mean the activities relating to “advancement of religion, spirituality and yoga”. With regard to the accommodation also, as per sl no. 13 of the said notification, there is an exemption for renting of rooms/premises with monetary limits. It seems ARA has given a go-by to all this and rendered another classical paradox. Just another example as to why we are losing “trust“on ARA”.

Rakesh Chitkara, Advocate in Delhi High Court said that, “Don’t ask. Don’t tell. (Don’t seek exemption else you will be impelled to produce your records for scrutiny) How will the government  enforce such provisions on religious institutions ?   This AAR is merely for academic purposes. No Inspector would visit their premises to check or seize the records. We all have seen them breaking the law with impunity and the government officials always looking the other way. Availing exemption would also necessitate maintenance of elaborate records. None wants to be accountable.For instance, making their prayer hall available for condolence meet, birthday,  engagement  parties, marketing conferences etc.  though most of them do bring out their annual accounts which lists such receipts”. 

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