2021 (11) TMI 397 - AAR - GST

Requirement to obtain registration under the Maharashtra Goods and Service Tax Act, 2017 - charitable activities or not - GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government - whether the activities undertaken by the applicant are covered under the definition of charitable activities or not? - HELD THAT - The applicant has nowhere mentioned that their activity particularly pertains to advancement of educational programmes or skill development only to abandoned, orphaned or homeless children. They also perform other activities for the homeless children such as shelter, guidance, clothing, food and health. We are bound by the definition of the term charitable activities as defined under the above said notification and are of the opinion that the applicant is not performing charitable activities , strictly according to the definition. Further the supply of services by the applicant to destitute women who are litigating divorce or are homeless or are victim of domestic violence also are not covered under the definition of charitable activities - the applicant does not satisfy the conditions mentioned at Sr.No. 1 of Notification No. 12/2017 dated 28-06-2017 which provides exemption from tax to Services supplied by an entity registered under Section 12AA of the Income-Tax Act, 1961 (43 of 1961) by way of charitable activities and hence the supply undertaken by the applicant is not exempt on this count - Since the activities undertaken by the applicant do not conform strictly to the definition of a charitable activity, the applicant shall obtain registration under GST Act. If the activity is held to be taxable then, whether the applicant is liable to pay GST on amounts received as Donation/Grants from various entities including Central Government and State Government? - HELD THAT - It may be noticed that there is no reference or mention of any business activity of the donor which otherwise would have got advertised. Thus where all the three conditions are satisfied namely the gift or donation is made to a charitable organization, the payment has the character of gift or donation and the purpose is philanthropic (i.e. it leads to no commercial gain) and not advertisement, GST is not leviable. If the applicant is liable to pay GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government, what will be the rate at which the GST would be charged? - HELD THAT - The applicant provides shelter, food, and medical facilities, clothing etc., to such destitute women mentioned above and also to rape victims. The applicant represents them before legal forums, including lodging FIR at police stations against the culprits and also arranges for counselling them through expert counsellors to bring them out of the trauma and help them to lead normal life - SAC 9993 covers Human Health and Social Care Services. From the submissions made by the applicant, in respect of destitute women it is seen that the applicant provides social services along with provision of accommodation. These types of services provided by the applicant are covered under SAC 999334. The subject services supplied by the applicant are covered under SAC 9993 and attract GST @18% (CGST 9% and SGST/UTGST 9%/IGST 18%) as per Notification No. 11/2017 - C.T. (R) dated 28.06.2017 as amended.

Summary

Issues Involved:

1. Requirement of registration under the Maharashtra Goods and Service Tax Act, 2017.
2. Liability to pay GST on amounts received as Donations/Grants from various entities including Central Government and State Government.
3. Rate of GST applicable if liable to pay GST.

Issue-wise Detailed Analysis:

1. Requirement of Registration under the Maharashtra Goods and Service Tax Act, 2017:

The applicant, a charitable trust registered under multiple acts including the Maharashtra Public Charitable Trust Act, 1950, and the Income Tax Act, 1961, sought clarification on whether it needs to register under the MGST Act, 2017. The trust provides services to orphans, homeless children, and destitute women, funded by government grants and public donations. The applicant argued that their activities are exempt from GST under Notification No. 12/2017, which exempts services by entities registered under Section 12AA of the Income Tax Act, 1961, by way of charitable activities.

The authority observed that the applicant’s activities did not strictly fall under the definition of "charitable activities" as per the notification, which includes specific activities such as advancement of educational programmes or skill development for abandoned, orphaned, or homeless children, and care or counseling of certain disadvantaged groups. The applicant's services, including shelter, education, guidance, clothing, food, and health, were not exclusively for educational or skill development purposes. Therefore, the applicant is required to obtain registration under the GST Act.

2. Liability to Pay GST on Donations/Grants:

The applicant questioned whether GST is applicable on amounts received as donations or grants. The authority referred to the definition of "supply" under Section 7 of the GST Act and "consideration" under Section 2(31), which includes grants but excludes subsidies given by the government. The authority concluded that since the applicant's activities do not qualify as charitable activities under the GST exemption notification, the grants received are considered as consideration for the supply of services and are thus taxable.

Regarding donations, the authority referenced Circular No. 116/35/2019-GST, which clarifies that donations or gifts are not taxable if they are philanthropic, not aimed at advertising the donor's business, and lead to no commercial gain. Therefore, donations that meet these criteria are not subject to GST, but other donations are taxable.

3. Rate of GST Applicable:

The applicant sought clarification on the GST rate applicable if their activities are taxable. The authority classified the services provided by the applicant under Service Accounting Code (SAC) 9993, which covers Human Health and Social Care Services. Specifically, services to orphans and homeless children were classified under SAC 999332, and services to destitute women were classified under SAC 999334. Both categories attract GST at 18% (CGST 9% and SGST/UTGST 9%/IGST 18%) as per Notification No. 11/2017.

Order:

1. The applicant is required to obtain registration under the Maharashtra Goods and Service Tax Act, 2017.
2. The applicant is liable to pay GST on grants received. Donations are exempt from GST if they are philanthropic, lead to no commercial gain, and are not aimed at advertising the donor's business.
3. The applicable GST rate is 18% (CGST 9% and SGST/UTGST 9%/IGST 18%).

This comprehensive analysis addresses all the issues raised in the judgment, maintaining the legal terminology and significant phrases from the original text.