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Notification No. 12/2017 - Central Tax (Rate) dated 28-06-2017 exempts services provided by entity registered under Section 12AA of the Income-tax Act, 1961 by way of charitable activities from whole of GST vide entry No. 1 of the notification, which specifies that ' services by an entity registered under Section 12AA of Income-tax Act, 1961 by way of charitable activities' are exempt from whole of the GST.

Following conditions are needed to be satisfied to comply with the definition of the Charitable trusts / entities:

  1. Entities must be registered under Section 12AA of the Income Tax Act
  2. Such services or activities by the entities are by way of charitable activities;

From the above definition, it is important to understand what comprises charitable activities

' Charitable activities' means activities relating to the following:

(i) public health by way of, -

(A) care or counseling of

(a) terminally ill persons or persons with severe physical or mental disability;
(b) persons afflicted with HIV or AIDS;
(c) 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 programs or skill development relating to, -

(A) abandoned, orphaned or homeless children;
(B) physically or mentally abused and traumatized persons;
(C) prisoners; or
(D) persons over the age of 65 years residing in a rural area;

(iv) preservation of environment including watershed, forests and wildlife.

From the above definition, it is understood that income from above mentioned activities are exempt from GST, income arising from any other activities is taxable. In practical scenario, there could be many other activities which are undertaken by the Charitable Trust registered under section 12AA of the Income Tax Act like renting of premises, grant of sponsorship and advertising rights, conducting of function etc., Such services are covered under GST.

Let us analyze these services which are undertaken by Charitable Trusts.

Renting of Premises for conducting Religious Ceremony

Entry No.13 of Notification No. 12/2017-C.T (Rate) dated 28-062017, provides the following exemption to entities registered under Section 12AA of the Income Tax Act:

Services by a person by way of-

(a) conduct of any religious ceremony;  

(b) renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) or a trust or an institution registered under sub clause (v) of clause (23C) of section 10 of the Income-tax Act or a body or an authority covered under clause (23BBA) of section 10 of the said Income-tax Act:

Provided that nothing contained in entry (b) of this exemption shall apply to,-

(i) renting of rooms where charges are one thousand rupees or more per day;

(ii) renting of premises, community halls, kalyanmandapam or open area, and the like where charges are ten thousand rupees or more per day;

(iii) renting of shops or other spaces for business or commerce where charges are ten thousand rupees or more per month.

From the above definition, it is understood that renting of place should be near to the religious place and it should be meant for general public.

As per Clause (zc) of the said notification, the term ' general public’ means ' the body of people at large sufficiently defined by some common quality of public or impersonal nature' .

As per clause 2(zz) of the said notification ' renting in relation to immovable property' means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property;

On analysis of the above two definitions, it is clear that immovable properties like marriage halls, conventional halls, rest house for pilgrims, shops situated near the religious place if they are rented, the income arising from rent is wholly exempt from GST. Any other rental income arising from immovable properties which are not within the four walls of religious premises are liable to GST.

Training and Coaching

The Entry No.80 of notification no.12/2017-Central Tax (Rate), provides the following exemption to a Services by way of training or coaching in recreational activities relating to-

(a)  arts or culture, or (b) sports by charitable entities registered under section 12AA of the Income-tax Act.

Thus, services provided by way of training or coaching in recreational activities relating to arts or culture or sports by a charitable entity will be exempt from GST.

Educational Institutions run by Charitable Trusts

As per the definition describing the Charitable activities (as mentioned in the first paragraph) If charitable trusts are running schools, colleges or any other educational institutions specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years or above residing in a rural area, such activities will be considered as charitable activities and income from such supplies will be wholly exempt from GST.

The rural area means the area belongs to a village as defined in land revenue records excluding the area under administration of municipal committee, Municipal Corporation, town area committee, cantonment board or notified area committee or any area that may be notified as an urban area by the Central Government or a State Government.

Services by and to Education Institutions

The Entry 66 of Notification No. 12/2017-C.T (Rate) dated 28-6-2017 provides for exemption with regard to supply by and to educational institutions and only the following services received by eligible educational institution are exempt:

(a) Transportation of students, faculty and staff of the eligible educational institution.
(b) Catering service including any mid-day meals scheme sponsored by the Government.
(c) Security or cleaning or house-keeping services in such educational institution.
(d) Services relating to admission to such institution or conduct of examination.

All services received by educational institutions managed by charitable trusts (for other than charitable activities, as defined) except those services mentioned above are taxable.

Yoga & Meditation camp by Charitable Trusts

Charitable trusts organize yoga camps or other fitness camps and they generally are not free for participants, as trusts charge some amount from the participants in the name of accommodation or participation. As the payment/donations are not made for yoga but for accommodation etc., it will be considered commercial activity and it will be covered under the levy of GST.

Note: Reiki, Aerobics are not exempted

Public Library maintained by Charitable Trust

The Entry No. 50 of Notification No. 12/2017- Central Tax (Rate), If donors of ‘public library remain open to all’ and if it caters to educational, informational and recreational needs of its users and finance for such libraries can be provided from donation, subscription, from special fund created for this purpose or from combination of all such sources, it will be called public library and no GST will be applicable on such services.

No GST will be applicable if charitable trusts are running public libraries and lend books, other publications or knowledge-enhancing content/material from their libraries.

Hostel accommodation maintained by Charitable Trust

It is clarified by CBIC; vide Circular No. 32/06/2018-GST, dated 12-2-2018 that Hostel accommodation services do not fall within the ambit of charitable activities. However, services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent are exempt. Thus, accommodation service in hotels including by Trusts having declared tariff below one thousand rupees per day is exempt.

Hospital / Clinical Establishment maintained by Charitable Trust

The Entry no. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017 (applicable to all persons including charitable trusts) exempts healthcare services at clinical establishment, an authorised medical professional or paramedics.

If charitable trusts run a hospital and appoint specialist doctors, nurses and provide medical services to patients at a concessional rate, such services are not liable to GST. If hospitals hire visiting doctors / specialists and these deduct some money from consultation / visit fees payable to doctors and agreement between hospital and consultant doctors is such that some money is charged for providing services to doctors, there may be GST on such amount deducted from fees paid to doctors. 


Published by

CA Amrita Chattopadhyay
(Audit & Assurance)
Category GST   Report

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