2023 (1) TMI 83 - AAR - GST

Exemption from GST - activity of Afforestation which includes the plantation of mangroves - Charitable activities or not - Sr. No.1 of Notification NO.12/2017-CT (Rate) - Whether the applicant is required to be get registered under GST? - HELD THAT - The applicant has undertaken the project of afforestation which include plantation of Mangroves covering 200 hectare area along coastal belt of Jambusar taluka Bharuch district Gujarat. Mangroves are one of the earth s most important ecosystems and serve many critical functions buffering coasts from storm surges preventing coastal erosion filtering water storing carbon serving as a vital habitat for a great number of species and providing food and livelihoods for local communities. Planning Commission New Delhi has published report of the Task Force on ISLANDS CORAL REFS MANGROVES WETLANDS IN ENVIORNMENT FORESTS For the Eleventh Five Year Plan 2007-2012. Chapter-3 of the report has elaborated causes of depletion of Mangroves benefits of plantation of Mangroves on Environment Economic and social aspect. The benefits of plantation of Mangroves along coastal and looking to the impact of plantation of mangrove on environment social and economic it is held that the activities of plantation of mangrove carried out by the applicant are covered under point (iv) of Charitable under clause 2 (r) of Notification No. 12/2017-CT (R) dated 28-6-2017 as amended. Determination whether activity of the applicant covered under Supply defined under Section 7 of CGST Act 2017 - HELD THAT - The applicant service of afforestation which include plantation of Mangroves along with the coastline to protect the environment and up liftmen of socially and economically marginalized people as discussed in the above paras cannot be considered a business activity. The said activity have not been done for the commercial benefit but it is being carried out for social and economic benefit of the marginalized people and to protect the environment. The applicant activity of plantation of Mangrove are covered under Charitable Activity as defined under Clause 2( r) of the Notification No. 12/2017-CT (Rate) dated 28-6-2017. The applicant is registered under section 12AA of the Income-tax Act 1961 (43 of 1961) as Charitable Trust thus service of plantation of Mangroves by the applicant is eligible for exemption from the payment of GST and covers under entry No. 1 of the Notification No. 12/2017-CT (Rate) dated 28-6-2017 - the applicant service of plantation of mangrove is covered under point (iv) of Charitable Activity define under clause 2 (r) of Notification No. 12/2017-CT (R) dated 28-6-2017 as amended and is eligible for exemption from payment GST in terms of entry No. 1 of Not. No. 12/2017-CT (Rate) dated 28-6-2017. The applicant service does not covered under supply as defined under Section 7 of CGST Act 2017 therefore applicant is not liable for registration under the provisions of Section 22(1) of the CGST Act 2017.

Summary

Issues Involved:
1. Whether the activity of afforestation, including the plantation of mangroves, is exempted from GST under Sr. No.1 of Notification No. 12/2017-CT (Rate)?
2. Whether the applicant is required to be registered under GST?

Issue-wise Detailed Analysis:

1. Exemption of Afforestation Activity from GST:

The applicant, a charitable trust registered under Section 12AA of the Income Tax Act, 1961, is engaged in various charitable activities, including afforestation projects. The main focus is on the plantation of mangroves along the coastal belt of Gujarat, which has several economic, environmental, and social benefits. The applicant argues that these activities fall under the definition of "charitable activities" as per clause 2(r) of Notification No. 12/2017-CT (Rate), which includes the "preservation of environment."

The Authority examined the objectives and activities of the trust, which include promoting human development, welfare, and environmental preservation. The afforestation project aims to reduce soil erosion, enhance fish catch, provide employment, and protect against natural disasters, thereby contributing to environmental preservation.

The Authority referred to the Planning Commission's report, which highlights the benefits of mangrove plantations, such as stabilizing shorelines, filtering water, and acting as carbon sinks. Based on these findings, the Authority concluded that the applicant's activities are indeed charitable as defined under clause 2(r) of the Notification No. 12/2017-CT (Rate).

2. Determination of Supply and Business Activity:

The term "supply" under Section 7(1) of the GST Acts includes all forms of supply of goods or services for consideration in the course or furtherance of business. The term "business" is defined under Section 2(17) of the GST Acts, encompassing trade, commerce, manufacture, profession, or any similar activity for pecuniary benefit.

The Authority examined the nature of the applicant's activities, which are not carried out for commercial benefit but for social and economic upliftment and environmental protection. The funds received for the afforestation project are utilized solely for the project without any profit motive. Therefore, the activities do not qualify as "business" under Section 2(17) of the GST Acts and are not considered "supply" under Section 7.

3. Registration Requirement under GST:

Since the applicant's activities are charitable and not considered "supply," they are not liable for GST registration under Section 22(1) of the CGST Act, 2017. The applicant's services are exempt from GST under Entry No. 1 of Notification No. 12/2017-CT (Rate), provided they are registered under Section 12AA of the Income Tax Act, 1961, and as a public charitable trust under the Bombay Public Trusts Act, 1950.

Ruling:

1. The activity of afforestation carried out by the applicant as a charitable organization is exempted from GST under Sr. No.1 of Notification No. 12/2017-CT (Rate) dated 28-6-2017, if the organization is registered under (i) Section 12AA of the Income Tax Act, (ii) Public Charitable Trust under the Bombay Public Trusts Act, 1950, and (iii) Charity Commissioner: Trust Registration no. E3183, Ahmedabad dated 04/01/1978.
2. The applicant is not required to be registered under GST if it fulfills all the conditions mentioned above.