GST Regulations for Charitable Trusts and NGOs: Everything You Need to Know

Charitable Trusts and Non-Governmental Organisations (NGOs) play a vital role in addressing social issues and promoting welfare activities in India. While these entities operate on a not-for-profit basis, they are not entirely exempt from the purview of the Goods and Services Tax (GST) in India. Understanding the GST implications for Charitable Trusts and NGOs is essential to ensure compliance and avoid any legal complications. This article provides a detailed overview of GST for Charitable Trusts and NGOs, including registration, exemptions, and compliance requirements.

Understanding GST and its Relevance to Charitable Trusts & NGOs

The Goods and Services Tax (GST) is an indirect tax that has replaced many other indirect taxes in India, including VAT, service tax, and excise duty. It is a comprehensive, multi-stage, destination-based tax levied on every value addition. While GST primarily targets commercial activities, Charitable Trusts and NGOs must understand their GST obligations, especially when their activities include the supply of goods or services.

GST Registration for Charitable Trusts & NGOs

Threshold for Registration 

Charitable Trusts and NGOs must register for GST if their aggregate turnover exceeds the threshold limit of ₹20 lakhs (₹10 lakhs for special category states). This turnover includes both exempt and non-exempt supplies.

Voluntary Registration:

Even if the turnover does not exceed the threshold limit, Charitable Trusts and NGOs can opt for voluntary registration. Voluntary registration can be beneficial as it allows the organisation to avail of input tax credit and maintain a transparent tax compliance record.

Process of Registration

The process for GST registration involves:

1. Online Application:
• Visit the GST portal (www.gst.gov.in).
• Fill out the registration form (GST REG-01) and submit the required documents.
2. Verification:
• The application and documents are verified by the GST authorities.
3. GSTIN Allotment:
• Upon successful verification, a unique GST Identification Number (GSTIN) is allotted.

Exemptions Available to Charitable Trusts & NGOs

Certain activities undertaken by Charitable Trusts and NGOs are exempt from GST. These include:

1. Services by an Entity Registered under Section 12AA of the Income Tax Act:
• Services provided by an entity registered under Section 12AA of the Income Tax Act, 1961, by way of charitable activities are exempt from GST. Charitable activities include activities related to relief of the poor, education, medical relief, and the advancement of any other object of general public utility.
2. Specific Exempt Services:
• Services by a charitable trust or an institution to its members by way of reimbursement of charges or share of contribution for the provision of exempt services.

Non-Exempt Activities and GST Implications

While many activities of Charitable Trusts and NGOs are exempt, certain activities may attract GST. These include:

1. Commercial Activities:
• Any commercial activity undertaken by the trust or NGO, such as running a cafeteria or selling goods, is subject to GST.
2. Renting of Premises:
• If a charitable trust or NGO rents out its premises for commercial purposes, the rental income is subject to GST.
3. Donations with Consideration:
• Donations linked with benefits, such as advertising in return for sponsorship, are considered as a supply of service and are liable to GST.
  
  

Input Tax Credit (ITC)

Charitable Trusts and NGOs registered under GST can avail of input tax credit on the GST paid on the procurement of goods and services used for furtherance of their activities. However, input tax credit cannot be claimed for exempt supplies.

Compliance Requirements

Charitable Trusts and NGOs registered under GST must adhere to the following compliance requirements:

1. Issuance of GST-Compliant Invoices:
• Ensure that all invoices issued are GST-compliant, including details such as GSTIN, invoice number, date, description of goods/services, HSN/SAC codes, and applicable GST rates.
2. Filing GST Returns:
• Regularly file GST returns, including GSTR-1 (details of outward supplies), GSTR-3B (summary return), and GSTR-9 (annual return).
3. Maintenance of Records:
• Maintain proper records of all transactions, including sales, purchases, input tax credit, and payments.
4. Payment of GST:
• Ensure timely payment of GST to avoid interest and penalties.
5. Reverse Charge Mechanism:
• Be aware of the reverse charge mechanism, where the recipient of goods/services is liable to pay GST instead of the supplier. This is applicable in specific cases, such as import of services.

Penalties for Non-Compliance

Non-compliance with GST regulations can lead to severe penalties, including:

1. Late Filing:
• A late fee of ₹100 per day for CGST and SGST, subject to a maximum of ₹5,000 each.
2. Non-Filing:
• Interest at the rate of 18% per annum on the outstanding tax liability.
3. Wrongful Claim of ITC:
• Penalty equal to the amount of wrongful credit availed or utilized.
4. Fraudulent Activities:
• Penalties ranging from 10% of the tax amount to imprisonment in severe cases.

Conclusion

While Charitable Trusts and NGOs operate on a not-for-profit basis, understanding and complying with GST regulations is crucial. Proper compliance ensures that these entities can continue their welfare activities without legal hindrances. By registering for GST, availing of applicable exemptions, and adhering to compliance requirements, Charitable Trusts and NGOs can maintain transparency and accountability in their operations.

For further assistance with GST registration and compliance, Charitable Trusts and NGOs can visit TheGSTCo.com. At TheGSTCo, we offer comprehensive GST services, including registration, amendments, filings, notice replies, refunds, cancellations, and reactivations. Our expertise ensures a smooth and hassle-free process, allowing you to focus on your core activities while we handle your GST compliance needs. Choose TheGSTCo.com for expert support in navigating the complexities of GST for Charitable Trusts and NGOs.