Whether sale of spiritual products by charitable trust is considered as supply and liable to GST?

PJ/Case Law/2018-2019/3507

Case: SHRIMAD RAJCHANDRA ADHYATMIK SATSANG SADHANA KENDRA

Citation: Order No. GST-ARA-41/2017-18/B-48-Mumbai, dated 14-6-2018

Issue: Whether sale of spiritual products by charitable trust is considered as supply and liable to GST?

Brief Facts: The appellant company Shrimad Rajchandra Adhyatmik Satsang Sadhana Kendra is a religious charitable trust registered under the section 12AA of the income tax act, 1961 working in the field of spreading the knowledge of Jain dharam and publications of books and other religious materials. The Applicant sought clarification primarily as to:

Whether the applicant which is a charitable trust with main object of the advancement of religion, spirituality or yoga is liable to registration under GST?
Whether sales of spiritual products which is incidental/ancillary to main charitable object of the applicant can be said to be business of the applicant in terms of the definition in Section 2(17)?
Whether the sale of spiritual products can be said to be supply under Section 7?

Appellant’s contention:The applicant presented that it is settled law that where the public charitable trust carries out activity for advancement of its main object of charitable purpose, the same cannot be said to be business in commercial sense as defined in the taxing Statute.
The applicants relied on the judgment of Hon’ble Supreme Court in the case of Commissioner of Sales Tax v. Sai Publication Fund (2002) 4 SCC 7 (SC), where in the Supreme Court categorically held that where the main activity is not business, then any incidental or ancillary transaction, unless established by the revenue department to be an independent business transaction, will also be considered as charitable only and not business.
The applicant also contended as since the aggregate of taxable supplies of goods and services does not exceed Twenty Lakh Rupees, the applicant is not liable for registration under Section 22(1) of the CGST Act, 2017.
Respondent’s Contention and reason of Judgment:The department referred to the Explanation Note issued to the Notification No. 12/2017-Central Tax (Rate), dated 28th June, 2017 by Directorate General of Taxpayer Services Central Board of Excise and Customs. The Notes states -
“There is no exemption for supply of goods by Charitable Trusts. Thus any goods supplied by such Charitable Trusts for consideration shall be liable to GST. For instance sale of goods shall be chargeable to GST”.
In view of the above detailed discussions, court concluded that the applicant is engaged in Trade and Commerce by way of selling of goods and services and are very well covered under the definition of ‘business’ as given under Section 2(17) of the CGST Act and in view of this, their activities are very well covered within the scope of ‘supply’ as given in Section 7 of the CGST Act, 2017 and are therefore liable to tax as applicable in respect of goods supplied or services rendered.
Under the GST Act, not all services provided by a Trust registered under Section 12AA would be termed as a charitable activity. Only the following activities are termed as charitable activity and are exempt from GST :
•      Services relating to public health
•      Public awareness of preventive health, family planning or prevention of HIV infection;
•      Advancement of religion, spirituality or yoga;
•      Advancement of educational programs or skill development relating to :
○      Abandoned, orphaned or homeless children;
○      Physically or mentally abused and traumatized persons;
○      Prisoners; or
○      Persons over the age of 65 years residing in a rural area;

Preservation of environment including watershed, forests and wildlife.

As applicant trust generates income from sale of goods, provides for accommodation and foods in various Shibir/Satsang on payment/chargeable basis. Such arranging residential or non-residential Satsang/Shibir/yoga camps by accepting/charging some amount from the participants will not be covered under “charitable activities” within the meaning of definition provided at Definitions at 2(r) of Notification No. 12/2017 Central Tax (Rate), dated 28-6-2017 of the expression charitable activities and in particular advancement of religion, spirituality or yoga.

Court came to the conclusion that the activities carried on by the applicant is in the nature of business as defined u/s 2(17) of the GST Act and further considering the GST Regulations that all services provided by the religious trusts and charitable institutions are not exempt from tax.

Comment: It was clarified that the GST law is very precise on what activities do fall under the ambit of charitable object and what activities do not qualifies to be covered under its ambit. The crux of the case is that ancillary activities like sale of spiritual products doesn’t qualify for exemption and are liable to GST.

Prepared by: Shubhanshu P. Jain

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PJ/Case Law/2018-2019/3507

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