2019 (3) TMI 1121 - AAR - GST

Levy of GST - provision of service or not - activities and work related to sanitation - charitable activities or not - Services provided to (NGO) Non-profit organization registered as Trust having registration U/s. 12AA of Income Tax Act - grant/ Donation received towards performing specific service towards preservation of environment as specified in N/N. 12/2017 - Held that - The notification benefit of Nil rate is available to services by an entity registered under Sec.12 AA of Income Tax Act,1961 by way of charitable activities. Though the applicant is registered under Sec.12 AA of Income Tax Act, 1961, the notification benefit would be available only if the applicant s activities fell within the scope of charitable activities as defined in the said Notification - The dictionary meaning of preservation is to keep up; to maintain; to keep safe from injury. Thus preservation of environment would cover both protection of environment (keeping it safe from destruction ) and conservation of environment (optimal use of natural resources and allowing them to regenerate or sustainable consumption of natural resources i.e. meeting the needs of present generation without compromising the needs of the future generations (Brundtland Report)). It is a well known fact that flush toilets waste large quantities of water and that recycling of human excreta would reduces pollution of the environment. Therefore the applicant s activities are covered by the activity specified under Para 2(r)(iv) of the Notification relating to preservation of environment. Applicant is also engaged precisely in activities relating to creation of awareness of sanitation which is an essential ingredient of preventive healthcare. Therefore the applicant s activities are also covered by the activities specified under Para 2(r)(B) of the Notification, though the applicant himself has not raised any argument in this regard. Thus, these activities can be considered as charitable activities and within the scope of Charitable activities as defined in 2 (r) of the exemption Notification No.12/2017-Central Tax (Rate) dated 28/06/2017 of the GST Act.

Issues Involved:
1. Whether services provided to a non-profit organization registered as a Trust under section 12AA of the Income Tax Act amount to provision of service.
2. Whether grants/donations received towards performing specific services towards preservation of the environment are liable for GST.

Issue-wise Detailed Analysis:

1. Provision of Service to Non-Profit Organization:
The applicant, M/s. Ecosan Services Foundation, sought an advance ruling to determine if the services provided to a non-profit organization registered as a Trust under section 12AA of the Income Tax Act amount to the provision of service and if such services are liable for GST. The applicant is engaged in providing services relating to sanitation, which they claim contribute to the preservation of the environment. The applicant emphasized that their activities fall under the definition of "charitable activities" as specified in Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017, which exempts services provided by entities registered under section 12AA of the Income Tax Act from GST.

2. Grants/Donations for Environmental Preservation Services:
The applicant received grants and donations from various entities, including Charities Aid Foundation, HSBC Ltd., and World Toilet Organization Singapore, for specific activities such as the repair and maintenance of toilets, urban community sanitation, and hosting the World Toilet Summit. The applicant contended that these activities amount to the preservation of the environment and should therefore be exempt from GST under the aforementioned notification.

Observations:
The Authority for Advance Ruling observed that the applicant is registered under section 12AA of the Income Tax Act and provides services such as sanitation capacity building, dissemination of knowledge in sustainable sanitation, providing sustainable solutions at the community level, and research in natural wastewater treatment technologies. The Authority noted that the applicant's activities, particularly the construction of suction toilets and waterless UDDTs, contribute to the conservation of water resources and the recycling of human excreta, thereby reducing environmental pollution. These activities align with the definition of "preservation of environment" under Para 2(r)(iv) of the notification.

Additionally, the Authority recognized that the construction of public toilets and related activities contribute to preventive healthcare by reducing the spread of diseases associated with open defecation. This aspect of the applicant's work aligns with the public awareness of preventive health as specified under Para 2(r)(B) of the notification.

Conclusion:
The Authority concluded that the services provided by the applicant to various entities, including NGOs, amount to the provision of service. Furthermore, grants and donations received towards the provision of these services are considered as received towards activities relating to the preservation of the environment. Consequently, such grants and donations are covered by the exemption under Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017, and are not liable for GST.

Order:
The Authority ruled that the services provided by the applicant to non-profit organizations registered as Trusts under section 12AA of the Income Tax Act amount to the provision of service. Grants and donations received for performing specific services towards the preservation of the environment are covered by the exemption notification and are not liable for GST.

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