GST Applicability on Religious place(NGO) like Dharamshalas

GST Applicability on Religious place(NGO) like Dharamshalas

The GST Law 2017 does provide certain exemptions for services related to religious places.  These Following provisions help ensure that religious places meant for public use maintain their exemption status, but they also clarify the applicability of GST when additional commercial services are offered. Here’s a breakdown based on your description: 

GST Applicability / Exemption on Renting of Religious Precincts:

• Services by a person by way of renting precincts of a religious place meant for the general public are exempt from Goods and Services Tax. Therefore, the rate of Goods and Services Tax payable on such services is nil.
• The GST flyer and relevant provisions under Chapter 39 clarified that the exemption for renting rooms is limited to those situated within the precincts of a religious place.

Charitable activities as defined in Notification No. 25/2012-ST

• Definition of “Religious Place and Precincts”: A religious place is defined as a place primarily meant for prayers, worship, or spirituality. The precincts refer to an area within the boundary walls of such a place.
• Goods and Services Tax law has chalked out Goods and Services Tax exemptions, when a charitable NGO / trust rents out religious meant for general public (owned & Managed by a registered NGO charitable trust u/s 12AA)
• NGOs registered under Section 12AA of the Income Tax Act, 1961, are exempt from GST for services provided by way of charitable activities as defined in Notification No. 25/2012-ST. The exemption is narrow and applies specifically to:
  • Public health services (e.g., care of terminally ill, HIV/AIDS counseling, etc.).
  • Advancement of religion, spirituality, or yoga.
  • Educational and skill development programs for certain vulnerable groups.
  • Preservation of the environment, including watershed, forests, and wildlife.
• Many Non-Governmental Organizations may fall outside this narrow definition. Activities that do not fit into the specified categories of charitable activities will not be exempt, and GST would be applicable.

Threshold for Goods and Services Tax Applicability:

• If annual gross rent received from renting out such religious precincts exceeds ₹20 lakhs, the person becomes liable for Goods and Services Tax registration. Once registered, the applicable Goods and Services Tax rate would be 18% on the rental services.
• Exemption does not apply to establishments like Dharamshalas that are not classified as religious places. In such cases, if the annual gross rent exceeds the threshold of ₹20 lakhs, Goods and Services Tax at 18% would be applicable.
• Religious place like Dharamshalas / Trust is liable to register for Goods and Services Tax if its total annual turnover from all activities exceeds ₹20 lakh.
• The rooms of Religious place like Dharamshalas / Trust are not located within the precincts of the Temple, they do not qualify for the exemption under GST.
• Income from letting out these rooms would be liable for Goods and Services Tax if the room charges exceed ₹1,000 per day.
• The accommodation services offered by the trust are subject to Goods and Services Tax since they do not qualify for exemption under the religious precinct clause.

Compulsory Registration & Turnover for NGO:

• NGOs making inter-state taxable supplies. Charitable & Religious Trusts required to pay GST under reverse charge. Non-Governmental Organizations making occasional taxable supplies in a state where they do not have a fixed place of business. Charitable & Religious Trusts making supplies through an e-commerce operator must register for GST, regardless of their turnover.
• Turnover under Goods and Services Tax includes the aggregate value of taxable and exempt supplies, exports, and inter-state supplies. This definition might imply that both commercial income and donations could be included in the turnover calculation, potentially requiring Goods and Services Tax registration if the aggregate exceeds INR 20 lakhs.

GST Taxability on Charitable & Religious Trusts on other Services:

If these establishments provide additional services such as meals to their guests, either as part of an accommodation package or separately, these services will attract Goods and Services Tax. The Goods and Services Tax rate for such services would typically depend on the specific nature of the service, but it usually falls within the standard rate of 5% to 18% depending on whether it’s a standalone service or part of a composite supply.

• Import of Services by NGO :
  • Charitable trusts are exempt from GST under the Reverse Charge Mechanism (RCM) when importing services for the purpose of providing charitable activities.
  • However, OIDAR services (Online Information and Database Access or Retrieval Services) are taxable, although the compliance burden does not fall on the trust.
• Services Provided to Charitable/Religious Trusts :
  • All services provided to a charitable or religious trust are taxable unless they fall under a specific exemption. This includes services like consulting, security, maintenance, etc.
• Supply of Goods by Charitable/Religious Trusts:
  • Any goods supplied by a charitable trust in exchange for consideration, including donations, are liable to GST unless specifically exempted.
• Services by and to Educational Institutions:
  • Exempt Services Provided by Educational Institutions:
    • Services to students, faculty, and staff are generally exempt.
  • The Exempt Services Provided to Educational Institutions:
    • Transportation of students, faculty, or staff.
    • Catering services, including government-sponsored mid-day meal schemes.
    • Security, cleaning, or housekeeping services.
    • Services related to admission or examination.
• Arranging Religious Yatras:
  • Religious yatras or pilgrimages organized by charitable or religious trusts are not exempt from GST. Exceptions include services provided by entities like Kumaon Mandal Vikas Nigam Limited or Haj Committee of India, which are exempt.
• Running Public Libraries:
  • Activities of public libraries, including those run by charitable or religious trusts, are exempt from GST when they involve lending books, publications, or other knowledge-enhancing content.

AAR ruling on Religious place like Dharamshalas / Trust.

The Ashram/Trust sought clarification on whether it needed Goods and Services Tax registration and whether its services fall under the GST regime. The AAR ruled that the trust is liable for GST registration if its annual turnover exceeds INR 20 lakh. This includes income from both accommodation and consulting services.

Activities of Religious place like Dharamshalas / Trust :

• Religious trust provides accommodation to pilgrims visiting the Temple with a room rent of ₹1,000 per day. It is also engaged in providing a wide range of professional consulting services, including architecture, engineering, urban design, project management, etc.
• The professional consulting services provided by the trust, including architecture, engineering, project management, etc., are taxable under Goods and Services Tax. These services do not fall under the category of charitable activities that are exempt from GST, as clarified by the Authority for Advance Ruling

Common Misconceptions About GST and NGOs

NGOs are Not Liable for Registration Under GST: Misconceptions-1

NGOs often believe they are exempt from GST registration if their income is below ₹20 lakhs. However, this is misleading:

• Aggregate turnover, not just income, is the determining factor for GST registration. This includes all taxable supplies of goods or services. NGOs must register if their aggregate turnover exceeds ₹20 lakhs in a financial year (INR 10 lakhs for special category states).

Interest on Fixed Deposits is Not Included in the INR 20 Lakh Threshold: Misconceptions-2

• Interest earned on fixed deposits is often misconstrued as outside the scope of GST. However, this interest is treated as exempt supply under GST, meaning it must be included in the aggregate turnover calculation for the INR 20 lakh threshold. Even though interest on fixed deposits is exempt from GST, it contributes to the turnover that determines whether an NGO needs to register under GST.

Conclusion & recommendations on GST on NGOs

Given the complexities & evolving nature of GST law, NGOs should Carefully evaluate their activities against the definitions provided under GST to determine if they qualify for exemptions. Seek expert guidance to ensure compliance, particularly in gray areas like the treatment of donations and the calculation of turnover. Misconceptions about exemptions and registration thresholds can lead to non-compliance, resulting in penalties. Regularly review GST laws and updates to stay compliant and avoid penalties.

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