GST Compliance for Charitable Trusts and Non-Profits

India’s Goods and Services Tax (GST) regime has streamlined indirect taxation for various sectors, but one area that continues to be surrounded by confusion is GST for non profit organizations. While charitable trusts and NGOs are primarily involved in social welfare and not profit-making, certain transactions undertaken by them may attract GST. Understanding the nuances of GST compliance is essential for such organizations to avoid legal pitfalls and stay compliant.

This blog offers a comprehensive guide to GST for non profit organizations, explaining when GST is applicable, the exemptions available, compliance requirements, and key considerations for charitable institutions.

Understanding Non-Profit Organizations under GST

Under GST law, there is no special category for non-profit entities. However, certain supplies made by charitable or religious trusts are exempt based on the nature of the activity. The Central Goods and Services Tax Act (CGST Act), 2017, clearly outlines when and how GST applies to such organizations.

A charitable trust or non-profit entity is required to register under GST if:

• The aggregate turnover exceeds ₹20 lakh (₹10 lakh in special category states).

• It engages in taxable supply of goods or services, even if on a limited scale.

• It provides services that are not specifically exempted under GST notifications.

The compliance landscape for GST for non profit organizations hinges on how these services are categorized.

Exemptions Available for Charitable Institutions

Certain services provided by charitable or religious trusts are specifically exempt under GST, as per Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017. The following services are generally exempt:

1. Health care services by an entity registered under Section 12AA/12AB of the Income Tax Act.

2. Educational services, such as running schools or colleges without profit motive.

3. Public religious worship, including activities related to temples, mosques, or churches.

4. Services by entities for:

   • Advancement of religion or spirituality

   • Yoga and meditation (not profit-oriented)

   • Distribution of food or clothing to the underprivileged

   • Preservation of the environment

Despite these exemptions, if the charitable trust undertakes any commercial activity or provides services to businesses (e.g., renting out property or organizing paid events), it may be liable to register and pay GST.

Understanding which services fall under exemption is a critical part of managing GST for non profit organizations effectively.

Activities Attracting GST

While some services are exempt, others attract GST regardless of the non-profit status of the provider. Here are common activities undertaken by charitable trusts or NGOs that may attract GST:

1. Renting of immovable property (e.g., leasing space to businesses)

2. Sale of goods (e.g., merchandise, books, crafts)

3. Sponsorship income or event participation charges

4. Consulting services provided to government or private entities

5. Fundraising events where entry is ticketed or commercial

In all such cases, GST becomes applicable, and registration is mandatory once the turnover threshold is crossed.

Thus, managing gst for non profit organizations requires careful segregation of exempt and taxable services.

Registration Requirements

Charitable trusts must register under GST if their turnover from taxable supplies crosses the applicable threshold. However, even below the threshold, voluntary registration is allowed and can be beneficial in certain scenarios.

Documents required for GST registration include:

• PAN of the trust

• Registration certificate under the Societies Registration Act / Trust Act

• Address proof and identity documents of trustees

• Bank account details

For organizations navigating gst for non profit organizations, accurate documentation during registration is essential to avoid future compliance issues.

GST Return Filing and Compliance

Once registered, non-profits must adhere to regular compliance, including:

1. Monthly/quarterly GST return filing (GSTR-1 and GSTR-3B)

2. Annual returns (GSTR-9 if applicable)

3. Maintenance of books of accounts as per GST norms

4. Issuance of GST-compliant invoices for taxable supplies

For small trusts, compliance can be burdensome, but ignoring it can lead to penalties and loss of reputation. Staying current with filings is a vital component of GST for non profit organizations.

Input Tax Credit (ITC) for NGOs

NGOs engaged in both exempt and taxable activities must be cautious while claiming Input Tax Credit (ITC). ITC can only be claimed for inputs used for taxable supplies. If an organization is involved in both exempt and taxable services, it needs to reverse or proportionately reduce the ITC claimed.

The rules surrounding ITC are particularly relevant in the context of gst for non profit organizations, where input purchases may overlap for multiple purposes.

Common Compliance Challenges

Despite good intentions, non-profit organizations often face the following challenges under GST:

• Misclassification of services as exempt

• Failure to register despite crossing thresholds

• Improper ITC claims

• Inconsistent invoice practices

• Lack of awareness about compliance deadlines

To avoid such pitfalls, organizations must invest in basic GST training for their accounting staff or hire external consultants familiar with GST for non profit organizations.

Best Practices for GST Compliance

To stay compliant, charitable trusts and NGOs should:

1. Review all income sources regularly to assess GST applicability.

2. Maintain clear records segregating exempt and taxable income.

3. Revisit exemption notifications periodically for any changes.

4. Conduct periodic GST audits to identify lapses or errors.

5. Use professional accounting software with built-in GST features.

These measures can help simplify the complex landscape of gst for non profit organizations and ensure legal adherence without straining limited resources.

Conclusion

GST compliance may seem overwhelming for charitable trusts and NGOs, but with the right understanding and support, it is manageable. While the law does offer several exemptions recognizing their non-commercial nature, it also places responsibilities on them for certain taxable activities.

Proper awareness, accurate documentation, and timely compliance are key to handling gst for non profit organizations effectively. As these entities continue to play a vital role in nation-building, it is essential that they align with tax laws while focusing on their core mission of service and impact.