When is a charitable trust exempt from GST?
A charitable trust is exempt from GST on a service only when two conditions are both met. The trust is registered under section 12AB of the Income-tax Act, or still recognised under section 12AA, and the service is a charitable activity as the GST exemption defines that phrase.
Which two conditions apply?
Registration under section 12AB is the income-tax registration of the trust. It is not, by itself, a GST exemption for every supply the trust makes. A registration that the income-tax authority still recognises under the earlier section 12AA meets the same condition. The second condition is the nature of the service. A service supplied for consideration that is not a charitable activity is taxable. Registration does not make the trust’s whole income exempt from income tax either. That is a different statute.
Which activities are charitable?
The exemption lists the activities. They include public health by way of care or counselling of terminally ill persons, persons with a severe physical or mental disability, persons afflicted with HIV or AIDS, and counselling for persons addicted to narcotic drugs or alcohol. They include public awareness of preventive health and of HIV. They include advancement of religion, spirituality, or yoga. They include advancement of educational programmes or skill development relating to abandoned, orphaned, or homeless children, physically or mentally abused persons, prisoners, and persons over the age of 65 years living in a rural area. They include preservation of the environment, including watershed, forests, and wildlife. A service outside that list is not brought in by calling the trust charitable.
What about goods?
The exemption is for services. Goods the trust sells for consideration are taxable supplies. There is no separate rule that goods of a trust have no turnover threshold. If those taxable supplies cross the threshold, the trust registers. The tax is charged at the rate for those goods.
When must the trust register?
A trust that makes only the exempt charitable services does not register merely because it exists. A trust that makes taxable supplies registers when its aggregate turnover crosses the threshold on the registration page. For services that threshold is ₹20 lakh in most states and ₹10 lakh in special category states. For goods it is ₹40 lakh in most states and ₹20 lakh in special category states. A case that section 24 makes compulsory, such as inter-state supply of goods, is on that page as well. The returns, once the trust is registered, are on the return page.
Frequently asked questions
Four questions cover section 12AB, a count of activities, goods, and the threshold.
Does section 12AB exempt every supply?
No. Income-tax registration is one condition. The service must also be a charitable activity as the GST exemption defines it. Another service supplied for consideration is taxable.
Is any two activities enough?
No. The trust does not pick two items from a list. The service itself has to be one of the charitable activities in the exemption.
Are goods sold at a charity sale exempt?
No. The exemption is for specified services. Goods sold for consideration are taxable supplies. The turnover threshold still applies to them.
Is the limit only ₹20 lakh, and ₹10 lakh in three states?
Services use ₹20 lakh in most states and ₹10 lakh in special category states. The list of special category states is the list on the registration page, not a list of three states.
Sources
The services exemption is entry 1 of Notification 12/2017-Central Tax (Rate). The entity is registered under section 12AB of the Income-tax Act, or still recognised under section 12AA. Charitable activities are defined in that notification.