Amount received by the NGO from Central or State Government are cover under GST or Not?

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The Maharashtra Bench of AAR in the case of Jaishankar Gramin VA Adivasi Vikas Sanstha vide order dated 10th November 2021 has held that the amount received by the said NGO from Central and/or State Government towards some charitable activities which are not exempted from the purview of GST.

It has been held that as per the relevant notification are liable for GST @ 18% since the services of Advertising are given when the nameplate of the Donor is affixed in lieu of the donation.

Jayshankar Gramin Va Adivasi Vikas Sanstha Sangamner, a Charitable trust registered under Maharashtra Public Charitable Trust Act 1950, had approached the Maharashtra Bench of the Authority for Advance Ruling (AAR), seeking clarity on whether it is liable to pay GST on the amounts received in the form of donations/grants from various entities, including the Central and State governments.

The trust is also registered under the I-T Act as a charitable trust.

It undertakes supply of services to 50 orphans and homeless children by way of shelter, education, guidance, clothing, food, and health for the women and child welfare.The Maharashtra Women and Child Welfare Department pay a sum of ₹2,000 per month per child. Other expenses for children are made from donations.

In its ruling, the AAR said the trust would be chargeable to 18% Goods and Services Tax (GST) for grants received by it.

In the case of donations, the AAR said if the purpose of the donation is philanthropic and leads to no commercial gains and is not an advertisement, then it would not attract GST.

In all other cases, donations too would attract an 18% GST.

AMRG & Associates Senior Partner Rajat Mohan said charitable trusts could land up paying GST since July 2017.

“This ruling is expected to send jitters to all the charitable organizations, enjoying tax-neutral status under indirect tax laws since the very beginning, mandating them to get registered under GST. Tax demands computed since 2017 would be loaded with additional interest @18% and penalty,” Mr. Mohan added.

Akshit Gadhia

Author of Tax Concept. Also, he is the Owner of Gadhia  Associate. The author is an avid reader and the author likes to write on various regulatory compliances. Currently, the Author Is pursuing CS, LLB, and ACCA. He has vast experience in Company Law and Roc Filings, Direct and Indirect Tax, Accounts, and Audits, and many other regulatory forms filings.

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