GST & it’s Impact on Charitable organizations / NGOs
Date of Effect: Goods &
Service Tax (GST) has been rolled out in India on 1st July 2017.
Service Tax (GST) has been rolled out in India on 1st July 2017.
What is GST: It is
an indirect tax applicable throughout India which has replaced
multiple cascading taxes levied by the Central and State governments.
an indirect tax applicable throughout India which has replaced
multiple cascading taxes levied by the Central and State governments.
GST
now incorporates
various indirect taxes under one law. This includes Central levies such as
Customs Duty, Excise Duty, Central Sales Tax and Service Tax and State levies
such as Value Added Tax (VAT), Luxury Tax, Electricity Duty, Entertainment Tax
and Entry Tax & Octroi.
now incorporates
various indirect taxes under one law. This includes Central levies such as
Customs Duty, Excise Duty, Central Sales Tax and Service Tax and State levies
such as Value Added Tax (VAT), Luxury Tax, Electricity Duty, Entertainment Tax
and Entry Tax & Octroi.
Why is GST referred to as an
Indirect tax: When one pays Income tax on salary or
business income it is a direct tax. Indirect taxes such as the erstwhile
Service Tax and VAT (now both under GST) are taxes that are charged by the
vendor of goods or services to the consumer and paid to the government of
India. In other words, while the onus of charging the tax is on the provider of
service or goods, the burden of payment is indirectly on the consumer.
Indirect tax: When one pays Income tax on salary or
business income it is a direct tax. Indirect taxes such as the erstwhile
Service Tax and VAT (now both under GST) are taxes that are charged by the
vendor of goods or services to the consumer and paid to the government of
India. In other words, while the onus of charging the tax is on the provider of
service or goods, the burden of payment is indirectly on the consumer.
What are the GST rates: Under GST, goods
and services are taxed at the following rates, 0%, 5%, 12%, 18% & 28%?
There is a special rate of 0.25% on rough precious and semi-precious stones and
3% on gold.
and services are taxed at the following rates, 0%, 5%, 12%, 18% & 28%?
There is a special rate of 0.25% on rough precious and semi-precious stones and
3% on gold.
Exemption: Education,
Healthcare, Residential accommodation, Hotel/Lodges with tariff
below Rs. 1,000/- are in the exempt category.
Healthcare, Residential accommodation, Hotel/Lodges with tariff
below Rs. 1,000/- are in the exempt category.
Should all NGOs register under GST: No. However, if
your NGO is already registered under VAT or Service Tax you may consider
registering under GST, if turnover in terms of goods or services of your
organization is more than Twenty Lakhs Rupees.
your NGO is already registered under VAT or Service Tax you may consider
registering under GST, if turnover in terms of goods or services of your
organization is more than Twenty Lakhs Rupees.
Until now the
threshold limit under Service Tax was Rs. 10 Lakhs and Rs. 5 Lakhs under VAT,
whereas under GST the limit is now Twenty Lakhs Rupees. This is of advantage to
NGOs and of course even small traders and manufacturers.
threshold limit under Service Tax was Rs. 10 Lakhs and Rs. 5 Lakhs under VAT,
whereas under GST the limit is now Twenty Lakhs Rupees. This is of advantage to
NGOs and of course even small traders and manufacturers.
Thus, those NGOs
which have not found the need so far to register under VAT or Service Tax are
not likely to require registration under GST either. In fact, with the
threshold having been raised four times for VAT and doubled in case of Service
Tax it should come as a relief to many NGOs.
which have not found the need so far to register under VAT or Service Tax are
not likely to require registration under GST either. In fact, with the
threshold having been raised four times for VAT and doubled in case of Service
Tax it should come as a relief to many NGOs.
Should NGOs which receive CSR Grants
register under GST: No. Grants are in the nature of a gift,
albeit, with various terms and conditions. Neither GST nor TDS should be
deducted on grants or donations.
register under GST: No. Grants are in the nature of a gift,
albeit, with various terms and conditions. Neither GST nor TDS should be
deducted on grants or donations.
However, GST
would apply to sponsorship and advertisements where benefit is accrued by the
sponsor or advertiser.
would apply to sponsorship and advertisements where benefit is accrued by the
sponsor or advertiser.
Are all services rendered by
charitable organizations exempt under GST: Services by an entity registered under section 12AA
of the Income Tax Act, 1961 by way of charitable activities is exempt.
charitable organizations exempt under GST: Services by an entity registered under section 12AA
of the Income Tax Act, 1961 by way of charitable activities is exempt.
“Charitable activities” for
the purpose of GST may be defined as presently in notification No. 25/2012-ST. These
include, healthcare services, ambulance service and “services rendered by an
entity registered u/s 12AA of Income Tax Act 1961 by way of charitable
activities”.
the purpose of GST may be defined as presently in notification No. 25/2012-ST. These
include, healthcare services, ambulance service and “services rendered by an
entity registered u/s 12AA of Income Tax Act 1961 by way of charitable
activities”.
However commercial services
for a consideration would be liable to GST if over Twenty Lakhs Rupees in a
financial year.
for a consideration would be liable to GST if over Twenty Lakhs Rupees in a
financial year.
What is ‘Reverse Charge’ under GST: The
concept of reverse charge mechanism was already present under service
tax. In the GST regime, reverse charge will be applicable for both
services as well as goods.
concept of reverse charge mechanism was already present under service
tax. In the GST regime, reverse charge will be applicable for both
services as well as goods.
GST has to be typically paid by the supplier of goods
and services. But in some cases, the liability to pay the tax falls on the
buyer or consumer. This reverse charge is, however, applicable only under
certain circumstances. The most common instance is when a business or NGO buys
goods or services from a supplier who is not registered to pay GST.
and services. But in some cases, the liability to pay the tax falls on the
buyer or consumer. This reverse charge is, however, applicable only under
certain circumstances. The most common instance is when a business or NGO buys
goods or services from a supplier who is not registered to pay GST.
Reverse charge under GST simply means the liability to
pay GST is by the recipient of goods/services instead of the supplier.
pay GST is by the recipient of goods/services instead of the supplier.
What
precautions should an NGO take to avoid ‘Reverse Charge’:
Ensure that your NGO hires only the services of an agency registered under GST
and buys goods from an agency registered under GST.
precautions should an NGO take to avoid ‘Reverse Charge’:
Ensure that your NGO hires only the services of an agency registered under GST
and buys goods from an agency registered under GST.
To clear your doubts or queries with regards to GST please write to us at connect@capindia.in