whether trust are excluded from the service tax act

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rajesh (Querist)
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23 March 2010 One of our client is a registered trust and it is running a hospital.

My question is whether they will be liable to pay service tax if value of taxable service exceeds Rs. 1000000/- eventhough it is trust?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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23 March 2010 With the substitution of the word "commercial concern" with "any person" in 2006 the exemption that would have been enjoyed thereto had been done away with resulting them to pay service tax if the threshold limit is crossed.

rajesh

rajesh (Querist)
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24 March 2010 Thank you sir.
I want to ask another question.

Before 2006 there is exemption from service tax to trusts?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2025 Here’s a clear summary on whether trusts are covered under the Service Tax Act and their liability:

1. Are trusts excluded from service tax?
No, trusts are not excluded from the Service Tax Act.

If a trust provides taxable services and the value of such services exceeds the prescribed threshold limit (Rs. 10 lakhs before 2011, Rs. 20 lakhs after), then it is liable to pay service tax.

This applies regardless of the nature of the entity (trust, company, individual, etc.).

2. What changed in 2006?
Prior to 2006, exemption was granted to “commercial concerns” only.

Many trusts and charitable organizations were thought to be exempt under this definition.

But from 1st July 2006, the definition was changed:

The exemption clause replaced “commercial concern” with “any person.”

This widened the scope and effectively removed blanket exemptions to trusts if they were providing taxable services.

So, post-2006, trusts have to pay service tax if their taxable services cross the threshold.

3. Before 2006:
Many trusts were enjoying exemption because of the wording “commercial concern,” which was ambiguous.

Charitable trusts running hospitals or educational institutions generally enjoyed exemptions unless they were engaged in commercial activities.

4. In your client’s case (hospital run by trust):
If the trust is providing taxable services (like hospital services not exempted under the service tax law) and

The aggregate value of such services exceeds the threshold limit (Rs. 10 lakh or Rs. 20 lakh, depending on the period),

Then the trust must pay service tax.

Summary Table
Period Liability of Trusts
Before July 2006 Many trusts exempt under “commercial concern” exemption
After July 2006 Trusts liable to pay service tax if threshold exceeded
Threshold Limit Rs. 10 lakh (pre-2011), Rs. 20 lakh (post-2011)

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