Impact of GST on NGOs and Charitable Trusts

Implementation of GST has seen as a great tax reform that will unify the entire nation, as far as taxation is concerned. This has been beneficial for various sectors, at the same time, implementation of GST will have social consequences on charities and the non-profit organizations.  

Let us take a look at the impact that GST’s implementation had on NGOs and charitable trusts. Under GST, charities will come be subject to pay Goods and Services Tax. This means that GST will be applicable on some of the services and goods supplied by a charitable trust or an NGO.

Latest Update

21st December 2021
Paragraph 7 under Schedule II has been removed and included within Section 7 as a new clause (aa). Accordingly, the supply of goods by any unincorporated association or body of persons to its members will be designated as supply.

1st February 2021
Union Budget 2021:

Section 7 of the CGST Act was amended to include a new clause under the definition of supply. Activities or transactions involving the supply of goods or services by any person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Earlier, this supply would have been considered as only supply of goods under schedule II. So, the scope is expanded now for levy.

Frequently Asked Questions

What are the criteria for a charitable trust to be exempted from GST?

There are certain criteria for a charitable trust or an NGO to be exempted from the Goods and Services Tax. The charitable trust or NGO must be registered under Section 12AA of the Income Tax Act, and the services provided by the charitable trust or the NGO must be for a charitable cause.

What is a charitable activity under GST?

The Goods and Services Act also specifies the criteria to be called a charitable activity. They are:  

• Public health services, such as:
  • Counseling of terminally ill persons or counseling for physically disabled
  • Counseling for people affected with HIV or AIDS
  • Counseling for alcohol-dependent persons
• Promoting of religion, spirituality, or yoga
  • Spreading public awareness on health, family planning
  • Promoting educational programs or skill development relating to:
    • Physically or mentally abused persons
    • Prisoners
    • Orphaned, homeless, or abandoned children
    • Rural area residents over the age of 65 
• Charitable services to preserve the environment (watershed areas, forests, and wildlife)
  If any charitable trust or an NGO does not meet at least two of the criteria, then GST will be applicable and the entity must register under GST.

What about goods sold by a charitable trust?

Goods that are sold by a charitable trust is taxable. The charitable trust must pay the GST rate applicable while purchasing the supply.

Is GST applicable on training programs, camps, and events conducted by a charitable trust?

If a charitable trust is conducting training programs, yoga camps, or other programs that are not free for participants, it will be considered as a commercial activity and hence will be liable for GST. Even the donation received for such an activity will be liable for taxation under GST. Services provided by way of training or coaching in recreational activities relating to arts and culture, or sports by a charitable entity will be exempt from GST.

Are the events organized by charitable trusts exempt from GST?

If 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.

What happens when a charitable trust rents out a religious place? Is there any GST on that?

GST law has chalked out GST exemptions, when a charitable trust rents out religious meant for general public (owned and managed by a registered charitable trust under 12AA of the Income Tax Act, 1961). GST will be exempted when:

• Rent out rooms are charged lesser than Rs.1,000 a day
• Kalyanamandapam or an open area is charged lesser than Rs.10,000 a day
• Rent out shops and other spaces for business are charged less than Rs.10,000 a month

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