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2019 (3) TMI 927 - AAR - GSTExempt service or not - Whether the conduct of marathon events by the Trust through which donations are raised for charity is an exempted service under GST? - When the Trust is approved under Sec 12AA of the Income Tax Act 1961 which means that the service of the Trust is charitable in nature, does it not automatically become a charitable activity that is exempted under GST? - Clause 2(r) of Notification No. 12/2017 -Central Tax (Rate) - Are donations received from participants of the marathon event exempted from GST as it is money paid for conduct of a marathon event for raising funds for charity? Held that - The Applicant is a Trust with the object to organize events for charitable Cause like Marathon, Blood Donation Camp, Organ Donation Camp, Eye Donation Camp, Health Awareness Camp, Etc., and utilize the fund raised for the charitable cause like funding to Non-Governmental Organisations(NGOs), Hospitals, Trust and other Charitable Organizations. They are registered under Section 12AA of the Income Tax Act 1961 and the receipts are exempted under Section 80 G of the Income Tax Act. The Applicant is conducting Marathon and the receipts of the event are utilized for conduct of the event and the balance left is donated to the cause for the support of providing prosthetic legs - In the instant case, the Applicant collects an amount from participants registered to for the marathon, treating them as donations . It is seen from the balance sheet that From these collected amounts, the expenses of paying the registration partner, event management expenses, prize money, expenses for conducting the marathon, are met and some portion of the balance is given as donation for various activities such as donating to Freedom Trust, a NGO who in turn provide prosthetic limbs to the less privileged public in Tamil Nadu apart from direct beneficiaries like Avvai Home, a school for poor and orphans and Olcott Memorial School. The activity in question is the Applicant organizing a Marathon. The money collected by the Applicant, from the participant in the Marathon is used for the expenses of organizing the Marathon in terms of paying the registration partner, event management charges, prize money, publicity, other organizing expenses such as T-shirts, banners and other related materials etc. as seen in their balance sheets. Therefore, the money collected from the participants is a consideration towards the supply of service of organizing and conducting the marathon for the participant s conduct of marathon event and the same is liable to GST. The activity of conduct of Marathon event by the Applicant does not fall under the definition for Charitable activities mentioned under clause 2(r) of Notification 12/2017-Central Tax(Rate) dated 28th June 2017 and Notification No. II(2)/CTR/532(d-15)/2017 vide G.O. (Ms) No. 73 dated 29.06.2017,. Therefore, though the Applicant is an entity registered under Section 12 AA of the Income Tax Act and conducts the Marathon events for raising funds for charitable activities, the exemption under Sl.No. 1 of these notification does not apply to the activity of organizing the marathon by the Applicant - In the instant case, the Applicant s annual turnover is more than ₹ 20 lakhs and they are providing the taxable supply of organizing marathon events. Hence, they are liable to register under CGST /TNGST Act.
Issues Involved:
1. Whether the conduct of marathon events by the Trust through which donations are raised for charity is an exempted service under GST. 2. Whether the Trust, approved under Section 12AA of the Income Tax Act 1961, automatically qualifies as a charitable activity exempted under GST. 3. Whether the Trust, performing charitable activities as per Clause 2(r) of Notification No. 12/2017 -Central Tax (Rate), requires registration under GST. 4. Whether donations received from participants of the marathon event are exempted from GST. Issue-wise Detailed Analysis: 1. Exemption of Marathon Events under GST: The Applicant, a Trust registered under Section 12AA of the Income Tax Act, organizes marathon events to raise funds for charitable causes. The collected amounts are used to cover event expenses, with the remaining funds donated to charitable activities. However, the conduct of marathon events is considered a separate supply of service. According to Section 2(31) of the CGST Act, the money collected from participants is deemed as consideration for organizing the marathon, making it liable for GST. Thus, the conduct of marathon events by the Trust is not exempt from GST. 2. Automatic Charitable Activity Exemption under GST: While the Trust is approved under Section 12AA of the Income Tax Act, this does not automatically exempt its activities from GST. The exemption under Sl.No. 1 of Notification No. 12/2017-C.T. (Rate) applies only to specific "charitable activities" as defined in Clause 2(r) of the notification. The Trust’s activity of organizing marathon events does not fall under this definition. Therefore, despite the Trust’s charitable status under the Income Tax Act, its marathon events are not exempt from GST. 3. GST Registration Requirement: As per Section 22 of the CGST/TNGST Act, any supplier making taxable supplies with an aggregate turnover exceeding twenty lakh rupees in a financial year must register under GST. The Trust’s annual turnover from organizing marathon events exceeds this threshold, making it liable for GST registration. Consequently, the Trust must register under the CGST/TNGST Act due to its taxable supply of services. 4. GST Exemption on Donations from Marathon Participants: The money collected from marathon participants is used to cover event expenses and is considered a supply of service. Therefore, it is not exempt from GST. The Trust’s claim that these amounts are donations does not change their liability under GST, as the funds are used for organizing the marathon, which is a taxable service. Ruling: 1. The conduct of marathon events by the Applicant is not an exempt supply under CGST/TNGST Act. 2. Only those activities of the Applicant that fall under the definition of "charitable activities" as per Clause 2(r) of Notification 12/2017-Central Tax (Rate) are exempt. 3. The Applicant is required to register under CGST/TNGST Act due to its taxable supply of services and annual turnover exceeding twenty lakh rupees. 4. The money collected from marathon participants is not exempt from CGST/SGST.
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