The Goods and Services Tax (GST) a major tax reform in India came into effect from 1st July 2017. GST is any supply of goods or services for a consideration, in cash or kind, in the course of business. It is applicable under different rates for different goods (0%, 5%,12%,18% and 28%), based on whether they are basic commodities or luxuries. Goods have different slabs, but all services attract a uniform rate of 18%.
There are Taxable services and Taxable goods besides exempted services and exempted goods. GST is not applicable if your Annual Gross receipts from the supply of Goods and Services (both exempted and taxable) are less than Rs.20Lakh. As GST is PAN based, annual gross receipts means the total receipts of whole organization under the PAN has to be taken into account. Another important thing is for the purpose of calculating the exemption limit of Rs.20 Lakh both Taxable services and goods and exempted services and goods will be taken into amount, but GST is applicable only for Taxable services and goods.
All our Trusts and Societies can be classified mainly into 5 categories as GST is concerned.
1. Trusts and Societies carrying Educational Activities
2. Trusts and Societies carrying Religious Activities
3. Trusts and Societies carrying Charitable Activities
4. Trusts and Societies carrying hospital activities
5. Trusts and Societies carrying combination of the above activities
As per notification No.12/2017 dated 28.6.2017 the following services are exempt:
1. ‘ Charitable activities’
Services by an entity registered u/s 12A/12AA of the Income Tax Act by way of charitable activities:
It means activities relating to (1) Public Health: It covers care or counselling of terminally ill persons or persons with severe physical or mental disability, persons afflicted with HIV or AIDS, persons addicted to a dependence-forming substance such as narcotics drugs or alcohol or Pubic awareness of preventive health, family planning or prevention of HIV infection, (2) Advancement of religion, spirituality or yoga: (3) Advancement of educational programs or skill development relating to: abandoned, orphaned or homeless children, physically or mentally abused and traumatized persons, prisoners or persons over the age of 65 years residing in rural area.
2. Educational Activities:
Services provided by an educational institution to its students, faculty and staff is exempt from GST. Educational institution means an institution providing services by way of pre-school education and education up to higher secondary school or equivalent, Education as a part of curriculum for obtaining qualification recognized by any law for the time being in force, education as a part of an approved vocational education course. It is clear that only the services provided to its students, faculty and staff is exempt from GST. If these educational institutions provide any other services to outsiders then they are taxable under GST. Of course it depends on the nature of service
Certain services rendered to the educational institutions like a Pre-school education and education up to higher secondary school or equivalent are exempt from GST. They are transportation of students, faculty and staff, catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory, Security or cleaning or housekeeping services performed in such educational institution, services relating to admission to, or conduct of examination by such institution, up to higher secondary. If the above said services are rendered to professional colleges, Degree Colleges, Post Graduate colleges then they are taxable under GST.
3. Religious activities:
Income by way of conducting a religious ceremony, renting of a religious place meant for general public (e.g.: a parish church premise) where the rent of the room is less than Rs. 1,000/- per day, the rent of premises, community hall kalyanamandapam or open area is less than Rs. 10,000/- per day and the rent of shops or other spaces for business or commerce is less than Rs. 10,000/-per month is exempt from GST. Seminaries and religious societies may take shelter under this provision, if there is no other taxable supply. Thus, income from a religious ceremony like Christmas or Navratri functions and religious events/poojas conducted on special occasions like religious festivals is exempt from GST.
However, renting out space during Ganesh festival or other religious functions to agencies for advertisement hoardings to promote their business or donations received for a religious ceremony with instruction to advertise the name of the donor, such income is chargeable under GST.
4. Health related activities:
Health care services by a clinical establishment, an authorized medical practitioner or para-medics and services provided by way of transportation of patient in an ambulance are GST exempt. Providing care or counselling of terminally ill persons or persons with severe physical or mental disability, persons afflicted with HIV or AIDS, persons addicted to a dependence-forming substance such as narcotics drugs or alcohol or conducting public awareness of preventive health, family planning or prevention of HIV infection are exempt from GST. But services such as hair transplant, cosmetic or plastic surgery done purely as a luxury are not GST exempt. Similarly, if charitable trusts running a hospital appoint a specialist doctors, nurses and provide medical services to patients at a concessional rate, such services are not liable to GST. Bust on the other hand, if hospitals hire visiting doctors or specialist and deduct some money from the consultation fees payable to doctors, there may be GST on such amount deducted from fees paid to doctors. All services other than mentioned here provided to charitable trusts will attract GST. There is no exemption for supply of goods by a charitable trust. Thus any goods supplied by such charitable trusts for consideration (sale) shall be liable to GST. Services by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India and transportation of a patient to and from a clinical establishment are exempt from GST
Services by a hotel, inn, guesthouse, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below Rs.1000 per day or equivalent are free of GST. Hence hostels, old age homes, working women hostels, hotels, clubs, guest houses, etc. if they charge below Rs. 1000/- per day for lodging (accommodation) only, then they are free from GST. Here boarding is a taxable supply and will attract GST.
6. Agricultural activities:
Cultivation of plants and rearing of all types of animals (except horse) for the purpose of food, fibre, fuel or raw material are kept out of GST. Hence, all agricultural related activities, supply of labour for agriculture, processes involved in an agricultural farm, renting or leasing of agro machinery or vacant land with or without structure, harvesting, drying, packing, loading, unloading and transport to warehouse, agents purchasing from farmers and even agricultural activity by a job worker are all exempt from GST. Hence, any farm produce, poultry, bee keeping etc. and the service providers for this industry like seeds, manure, chicken feed, medicine, etc. are GST-exempt.
7. Donations and Other Items:
Any donation received without any consideration is supply of neither goods nor service, it is exempt from GST. Mass wine due to the alcohol content, will not attract GST, but will incur the usual sales tax. Normal unpacked food items like rice, dal, pulses, grains vegetables fruits, etc. will not attract GST.
Certain other things/activities that attract GST :
1. Any construction or building maintenance related or any other contract which will attract GST and GST TDS too, if the value exceeds Rs.2.5. lakh per contract. Here it has to be noted that the earlier exemption from service tax for religious institutions has now been withdrawn.
2. Any occasion of reverse charge mechanism (RCM), especially while getting the services of an advocate or transport agency or an author writing for a publishing agency.
3. Any job work related to printing and textile processing.
4. Input service of all approved educational institutions of higher studies as well as input and output services of all unrecognised educational institutions of higher studies will attract GST. Hence, services by way of catering, canteen, security contracts for an organisation other than the pre-school and school up to higher secondary will attract GST.
5. Similarly, activities such as working women’s hostel, hostel of higher studies for private students, seminaries (if taken as an educational activity), old age homes, etc. will attract GST, if the inmates are charged for their boarding (food). Here, if the charges are only for accommodation and is below Rs.1000/ per day, it will be out of GST.
6. Any e-commerce or online buying and selling will attract GST.
7. GST of 5% is applicable on rosaries and 12% on statues but clay statues will not attract GST.
8. Any activity of business nature that involves a sale component or consideration (e.g., sale of school uniforms, badges, stationery or other handicraft material, sale of scrap, etc.) will attract GST.
9. Ordinary packed food items and sugar will carry a GST of 5%.
10. Similarly, any incentive received, income on advertisement in souvenirs, hoarding rent, events income, entry tickets of more than Rs.250 for events, etc. will attract GST.
From the moment you are registered under GST (composite or normal), you cannot buy any goods or services from any unregistered dealer (URD) for more than Rs.5,000 per day. This will attract RCM. The competency and knowledge required to do this would mean hiring a qualified person to handle these demanding requirements. Hence, if you are falling under GST due to a negligible amount of income (e.g.: income from hoarding rent, uniform, sale of handicraft items, etc.) it may be worth considering dropping such activities so that you are out of GST and all its cumbersome demands.
(The writer is an Advocate with the Supreme Court of India.)
(Published on 04th December 2017, Volume XXIX, Issue 49)