TMI Blog2021 (11) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... or are homeless or are victim of domestic violence also are not covered under the definition of charitable activities - the applicant does not satisfy the conditions mentioned at Sr.No. 1 of Notification No. 12/2017 dated 28-06-2017 which provides exemption from tax to Services supplied by an entity registered under Section 12AA of the Income-Tax Act, 1961 (43 of 1961) by way of charitable activities and hence the supply undertaken by the applicant is not exempt on this count - Since the activities undertaken by the applicant do not conform strictly to the definition of a charitable activity, the applicant shall obtain registration under GST Act. If the activity is held to be taxable then, whether the applicant is liable to pay GST on amounts received as Donation/Grants from various entities including Central Government and State Government? - HELD THAT:- It may be noticed that there is no reference or mention of any business activity of the donor which otherwise would have got advertised. Thus where all the three conditions are satisfied namely the gift or donation is made to a charitable organization, the payment has the character of gift or donation and the purpose is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression GST Act would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT 2.1 The applicant is Charitable trust registered under Maharashtra Public Charitable Trust Act 1950 w.e.f. 15-02-1993. The Trust, Jayshankar Gramin VA Adivasi Vikas Sanstho Sangamner (hereafter referred as trust) is also registered under Societies Act vide registration number Maha/2041/92 w.e.f. 23/12/1992. The applicant is registered under section 12AA of the Income Tax Act 1961 w.e.f 08/10/2009. 2.2 The trust has it s head office at 1st floor, Madhav Parvati complex, veer savarkar Marg, Sangamner. The destitute home for children is located at Akole bypass road, Sangamner. 2.3 The trust undertakes supply of services to 50 orphans and homeless children by way of shelter, education, guidance, clothing, food and health for the Women and Child welfare. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Text of the Circular is as follows: 1. A representation has been received seeking clarification whether donations and grants-in-aid received from different sources by a charitable Foundation imparting free livelihood training to the poor and marginalized youth, will be treated as consideration received for such training and subjected to service tax under commercial training or coaching service . 2. The matter has been examined. The important point here is regarding the presence. Or absence of a link between consideration and taxable service. It is a settled legal position that unless the link or nexus between the amount and the taxable activity can be established, the amount cannot be subjected to service tax. 3. Donation or grant-in-aid is not specifically meant for a person receiving such training or to the specific activity, but is in general meant for the charitable cause championed by the registered Foundation. Between the provider of donation/grant and the trainee there is no relationship other than universal humanitarian interest. In such a situation, service tax is not leviable, since the donation or grant-in-aid is not linked to specific trainee or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om cumulative reading of the above factors, Hon ble Advance ruling authority be pleased to hold that applicant trust is not liable for registration under MGST Act 2017 nor is liable to pay GST on the Grants received from Central / State Government. Also, the NGO is not liable to pay GST an the Donation received by the NGO for carrying out the Charitable Activity. 03. CONTENTION -AS PER THE CONCERNED OFFICER: Submission on 27.11.2020:- 3.1 Applicant is Charitable Trust registered under Maharashtra Charitable Trust Act, 1950. They are also registered under the Society Act and Income Tax Act, 1961 as a charitable trust. The trust is also registered under section 80 G(5) of Income Tax Act along with section 12AA of the Act. 3.2 Applicant undertakes supply of services to 50 orphans and homeless children by way of shelter, education, guidance, clothing, food and health for the Woman and Child welfare ministry of Govt. of Maharashtra. The Govt. of Maharashtra pays sum of ₹ 2000/- per month per child in form of Grants and other expenses for children are made from donations Vide letter dated 12/03/2020, applicant also informed that they are also rendering services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to destitute women at One Stop Crises Center, Near Ladies Observation Home, Nasardi Bridge, Nashik-422001. 3.6 From the above said information provided by the applicant, it cannot be concluded as to whether the services provided to destitute women who are litigating divorce or homeless or the victim of domestic violence are in relation to the sub point B of point (iii) of Charitable activities means or otherwise. 3.7 In view of the above, classification of the services would be decided on basis of Specific nature of the services provided by the applicant. Further, as per the details submitted the activities carried out by the appellant are specifically not covered under the exemption Notification serial no.1, Chapter 99 of notification no. 12/2017-Central Tax (Rate) dated 26-06-2017 though they are registered under section 12AA of Income-tax Act, 1961 (43 of 1961) by way of charitable activities, thus it appears that all the activities of the applicant are not covered under said notification. Thus on the basis of details submitted by the applicant it cannot be concluded that they are not liable to take registration. 04. HEARING 4.1 Preliminary e-hearing in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of grants. Applicant also receives donations from public. 5.5 The applicant is claiming exemption under Sr. No. 1 of Notification No. 12/2017 dated 28-06-2017 which provides exemption from tax to Services supplied by an entity registered under Section 12AA of the Income-Tax Act, 1961 (43 of 1961) by way of charitable activities. 5.6 We find that the applicant is registered under Section 12AA of the Income-Tax Act, 1961 (43 of 1961) as submitted by them. To avail the benefit of exemption under the said notification the services supplied should by way of charitable activities. 5.7 The words charitable activities are defined in the said notification as, activities relating to: (i) public health by way of: (A) care or counseling of (I) terminally ill persons or persons with severe physical or mental disability; (II) persons afflicted with HIV or AIDS; (III) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or (B) public awareness of preventive health, family planning or prevention of HIV infection; (ii) advancement of religion, spirituality or yoga; (iii) advancement of educational programmes or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch provides exemption from tax to Services supplied by an entity registered under Section 12AA of the Income-Tax Act, 1961 (43 of 1961) by way of charitable activities and hence the supply undertaken by the applicant is not exempt on this count. 5.13 From a perusal of the submissions made by the applicant it is seen that the main thrust of its argument is that the activity of supply by the applicant trust are fully exempted from levy of tax under the provisions of Sr.No. 1 of Notification No. 12/2017 C.T. (R) dated 28.06.2017 i.e. Services supplied by an entity registered under Section 12AA of the Income-Tax Act, 1961 (43 of 1961) by way of charitable activities. Since we have found that the activities undertaken by the applicant do not conform strictly to the definition of a charitable activity, the applicant shall obtain registration under GST Act. 5.14 The second question raised by the applicant is, If their activity is held to be taxable then, whether the applicant is liable to pay GST on amounts received as Donation/Grants from various entities including Central Government and State Government. To answer this question we discuss the present issue as under:- 5.14.1 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the sold supply; 5.14.3 In order to arrive at a definitive conclusion on the taxability of service, the main ingredients which need to be necessarily present, as per GST statute, are the service (supply), the service provider (supplier), the service receiver (recipient) and the consideration for the service. In the instant case, if we refer to definition of supply (which is very much exhaustive), it covers almost all activities of the applicant. Moreover, definition of consideration includes grants and excludes only subsidy . The profit motive is not important, if we make combined reading of all above definitions, including that of the business . 5.14.4 The above provision provides that if there is supply of goods and services, made for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Mr. Rajesh printed underneath a digital blackboard donated by Mr. Rajesh to a charitable Yoga institution. (b) Donated by Smt. Malati Devi in the memory of her father written on the door or floor of a room or any part of a temple complex which was constructed from such donation. 2.2. In each of these examples, it may be noticed that there is no reference or mention of any business activity of the donor which otherwise would have got advertised. Thus where all the three conditions are satisfied namely 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, GST is not leviable. 5.15.1 The third question raised by the applicant is if 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 be the rate at which the GST would be charged. 5.15.2 To find the rate of tax we need to classify the services supplied by the applicant. 5.15.3 The services supplied by the applicant as per its submissions includes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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