GST Update on Taxability on Pollution Cess

Pollution cess is being levied and collected from the industrial units located in industrial area. If the cess is being levied and collected by the trust registered under section 12A of the Income Tax Act, 1961; no tax will be levied. This has been provided in Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017. The entry no. 1 of this notification reads as follows:-
"Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities."
The analysis of this entry makes it clear that:-
• The exemption is being granted to a trust registered under section 12AA of the Income Tax Act, 1961.
• The activity on which exemption has been granted should be "charitable activity".
The term charitable activities has been defined in clause 2(r) to this notification which reads as follows:-
(r) “charitable activities” means activities relating to -
(i) public health by way of ,-
(A) care or counseling of
(I) terminally ill persons or persons with severe physical or mental disability;
(II) persons afflicted with HIV or AIDS;
(III) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or
(B) public awareness of preventive health, family planning or prevention of HIV infection;
(ii) advancement of religion , spirituality or yoga; 22
(iii) advancement of educational programmes or skill development relating to,-
(A) abandoned, orphaned or homeless children;
(B) physically or mentally abused and traumatized persons;
(C) prisoners; or
(D) persons over the age of 65 years residing in a rural area;
(iv) preservation of environment including watershed, forests and wildlife;"
Thus, the term "charitable activities" include preservation of environment. Pollution is responsible for deterioration of environment; therefore, efforts taken for controlling the pollution will also come in purview of preservation of environment.
Therefore, the above referred exemption under serial no. 1 of notification no. 12/2017-CT(Rate) will be applicable if the following conditions are satisfied:-
• The levy and collection of pollution cess is being done by the trust registered under section 12AA of the Income tax Act, 1961.
• The proceeds of said cess are being utilized for controlling the pollution.
We hope the above will be beneficial to you.
Disclaimer: The content of this document is solely for informational purpose. We are not responsible for any loss or damage, if any, arising out of information contained herein. Also, we are not responsible for any actions taken by placing reliance on the same. Though we have taken due care in preparing this opinion, yet, the existence of any mistake or omission is not ruled out. This opinion is not meant for circulation or distribution (except for personal or non-commercial use) without out written permission. Our views are based upon the facts and assumptions indicated by you. No assurance has been given that the revenue authorities or courts will concur with the view expressed herein. Our views are based upon best of our knowledge of Central Excise, Customs and GST law and its interpretation which is subject to change from time.
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GST Update on Taxability on Pollution Cess

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