2020 (4) TMI 599 - AAR - GST

Requirement for registration under GST Act - Charitable trust established for activities relating to disaster prevention, mitigation and management - HELD THAT - It is found from the objectives of the applicant as described in the Memorandum of Association as well as from the bye-laws of the applicant, which laid down the modes by which the applicant can raise funds for its activities as mentioned in foregoing paras that the applicant is a charitable trust registered under the Bombay Public Trust Act, 1950. It was established for community based research, policy analysis, planning and technical assistance for the purpose of enhancing prevention, mitigation and management of disasters and reorientation of relief and reconstruction to local initiatives. Thus the applicant is engaged in training/research relating to disaster prevention, mitigation and management - the Applicant is duly registered as a charitable trust under Section 12AA of the Income Tax Act, 1961 as well as under Section 80G of the Income Tax Act. The entire income of the applicant is exempt from Income Tax, even the donations made to the applicant are admissible deductions for the donors under Section 80G of the Income Tax Act - Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 (Sr.No.1) clearly provides exemption to Services by an entity registered under section 12AA of the Income-tax Act, 1961(43 of 1961) by way of charitable activities. Thus, the activities of the applicant relating to disaster prevention, disaster mitigation and disaster management are activities relating to preservation of environment . Thus, the activities of the applicant are considered as charitable activities and hence, activities of the applicant, being registered under Section 12AA of the Income Tax Act, 1961, exempt from tax under the GST Acts, by virtue of Entry No. 1 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 - Consequently, the applicant is not liable to registration in respect of charitable activities relating to preservation of environment which attracts nil rate of GST, by virtue of Section 23(1) (a) of the Central Goods and Services Tax Act, 2017.

Summary

Issues Involved:
1. Whether the applicant is liable for registration under the GST Acts.

Issue-wise Detailed Analysis:

1. Nature and Objectives of the Applicant:
The applicant is a charitable trust registered under the Bombay Public Trust Act, 1950, with primary objectives including disaster prevention, mitigation, management, relief administration, recovery planning, and reconstruction. The applicant offers professional services, educational programs, training, and strategic funding to various bodies to achieve these objectives.

2. Contracts and Funding:
The applicant enters into contracts with Indian government agencies, foreign agencies, state governments, private NGOs, and educational institutions to fulfill its objectives. Funds are raised through donations, grants, fees for research, training, consultancy assignments, and other modes as specified in the bye-laws.

3. Tax Exemption Status:
The applicant is registered under Section 12AA and Section 80G of the Income Tax Act, 1961, making its income exempt from income tax and allowing donors to claim deductions.

4. Definition of 'Supply' and 'Business' under GST:
For a transaction to qualify as a 'supply' under Section 7(1) of the GST Acts, it must be in the course or furtherance of 'business' as defined under Section 2(17). The applicant contends that it is not engaged in 'business' as its activities are charitable and not commercial.

5. Supreme Court and High Court Judgments:
The applicant cites multiple judgments, including the Supreme Court's ruling in Commissioner of Sales Tax vs. Sai Publication Fund, which held that activities incidental to the main charitable objective do not constitute 'business'. Similar judgments from various High Courts support the applicant's claim that it is not engaged in business and hence not liable for GST registration.

6. Charitable Activities Exemption under GST:
Even if the applicant's activities qualify as 'supply', they are exempt from GST under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which exempts services by entities registered under Section 12AA of the Income Tax Act by way of charitable activities. The applicant's activities relating to disaster prevention, mitigation, and management are considered as 'preservation of environment', thus falling under the definition of 'charitable activities'.

7. Exemption from Registration:
Section 23(1)(a) of the GST Acts exempts entities exclusively supplying exempt goods or services from registration. Since the applicant's activities are charitable and exempt from tax, it is not required to register under GST.

Judgment:
The Authority for Advance Ruling concluded that the applicant is not liable for registration under the GST Acts if engaged exclusively in supplying goods or services that are not liable to tax or are wholly exempt from tax, including services by way of 'charitable activities' as defined in the relevant exemption notification.