In India, unless specifically exempted or given a NIL rating by the GST Council, GST is applied to all categories of goods and services. Contrary to popular assumption, GST may apply to services and items provided by a charitable trust or non-profit organization. In This, we will examine GST laws that apply to Indian NGOs and charitable trusts, about NGO GST registration and GST filing.
What is an NGO(Non-governmental organization)?
A Non-governmental organization that conducts business outside of the government is known as an NGO. NGOs, also called civil societies, are Non-governmental organization (NGOs) established locally, nationally, and internationally to advance a social or political objective, such as the environment or humanitarian issues.
Types of GST
There are 3 categories of GST:
IGST(Integrated Goods and service tax)
SGST(State Goods and service tax)
CGST (Central Goods and service tax)
IGST:
The IGST (Integrated Goods and Services Tax) is levied when products and services are moved interstate. For instance, when a business imports products from another state.
SGST:
When there are multiple goods and services taxes, such as a VAT, sales tax, or entry tax, the total tax is known as SGST (State Goods and Service Tax). The state is allowed to claim the tax revenue.
CGST:
When a transaction occurs within a state, such as when paying State tax, CST, or SAD, CGST (Central Goods and Service Tax) is levied.
An intra-state transaction occurs within the same state, wherein CGST and SGST will be charged. You can see that there is double taxation here because you are aware that India is a federal state with different powers for the central and state governments.
An inter-state transaction is one in which two different states are involved; in this case, only the IGST will be charged.
Conditions for Charitable Trust GST Exemption
A charity trust or NGO(Non-governmental organization) must meet the following two requirements to be exempt from GST:
- You must register your entity under Section 12AA of the Income Tax Act.
- The organization's services must be charitable endeavours.
Not all services rendered by a Trust registered under Section 12AA would be considered charity activities under the GST Act. Only the following activities are considered charity in nature and are GST-exempt:
- Services in the area of public health include:
- Support for those who are HIV or AIDS positive;
- Care or counselling for those who are terminally ill or have significant physical or mental disabilities;
- Those who are dependent on a substance, such as alcohol or opioids;
- Advancement of yoga, meditation, and other spiritual practices;
- Public awareness of family planning, HIV prevention, and other preventive health measures;
- Advancement of educational initiatives or skill-building concerning:
- Homeless, orphaned, or abandoned children:
- Traumatized and physically or psychologically mistreated individuals;
- Prisoners or elderly residents of rural areas who are over 65;
- Protection of the natural environment, including the watershed, the forests, and the fauna.
- If a charitable trust or non-profit organization doesn't meet the first two requirements, GST will be in effect, and the entity will be obliged for NGO GST registration and GST filings.
Are NGO services exempt from the GST?
No, only charitable activities, as previously described, carried out by charitable trusts or NGOs registered under 12AA are exempt from GST. Any additional services rendered by a Trust in exchange for money would be subject to GST tax.
Are NGO products free from GST?
Yes, products sold by an NGO(Non-governmental organization) for money are subject to GST. Therefore, there is no exemption for charitable trusts that provide goods.
Therefore, the charity trustees must pay the usual GST rate on purchases and collect it when products are supplied.
The following documents are required if you need NGO GST registration for filing GST for NGO:
- Society/Trust/NGO Pan Card
- NGO(Non-governmental organization) certificate Passport-size PAN cards and pictures of the promoters and partners
- PAN and Aadhaar cards of the designated signatory are required.
- Any additional documentation identifying an authorized signatory, such as a board resolution
- Proof of Registered Office Address
- Account information
Conclusion
In light of the provisions outlined in the general bylaws, the impact of GST on NGOs is mainly favourable. It does not charge anything fundamental to society and only levies taxes on things within the parameters of the current GST regulations. NGOs aren't always subject to hefty GST taxes.
Additionally, feel free to speak with our lawgical India business experts if you need any additional advice regarding GST filing or NGO GST registration.
