{"id":896,"date":"2018-10-17T21:49:22","date_gmt":"2018-10-17T21:49:22","guid":{"rendered":"https:\/\/idronline.org\/2020\/12\/23\/how-gst-affects-nonprofits\/"},"modified":"2025-11-26T16:13:16","modified_gmt":"2025-11-26T10:43:16","slug":"how-gst-affects-nonprofits","status":"publish","type":"post","link":"https:\/\/idronline.org\/kn-in\/how-gst-affects-nonprofits\/","title":{"rendered":"How GST affects nonprofits"},"content":{"rendered":"

The Goods & Service Tax<\/a> (GST) Act came into effect from 1st<\/sup> July 2017, and has since affected nonprofits in a manner that neither the nonprofits, nor their donors, have adequately accounted for.<\/p>

This act has implications on nonprofits in two ways:<\/p>

1. As providers of goods and services<\/h3>

A ‘taxable person’ under GST, is ‘a person who carries out any business at any place in India and who is registered or required to be registered under the GST Act<\/a>‘. Any person who engages in economic activity including trade and commerce is treated as a taxable person.<\/p>

\"What<\/a><\/div>

‘Person’ here includes individuals, HUF<\/a>s, companies, firms, LLPs, an AOP\/BOI<\/a>, any corporation or government company, body corporate incorporated under laws of foreign country, co-operative societies, local authorities, governments, trusts, artificial juridical persons.<\/p>

While the definition of ‘taxable person under GST’ includes a trust, society, or Section 8 company, as long as these entities are not engaged in economic activity including trade and commerce, they cannot be treated as a taxable person under GST.<\/p>

However, the Authority of Advanced Ruling (AAR) for GST in Maharashtra has recently ruled<\/a> that goods and services provided by charitable organisations for a fee classify as supply, making them liable for GST.<\/p>

Even if a nonprofit is charitable, GST will be applied on their products if their turnover is more than INR 20 lakh.<\/p><\/blockquote>

The ruling further states that all charitable organisations need to register under GST if their annual turnover from this sale of goods and services is above the threshold of INR 20 lakh. Therefore, a nonprofit that sells products—for example, stationery or honey—is liable to register under GST if its income from the sale of these products is more than INR 20 lakhs in any financial year. Similarly, a nonprofit that provides a service—such as digital literacy courses to young women—is liable under GST in the same way.<\/p>

For the time being, this order has therefore put all doubts and disagreements regarding applicability of GST to charitable organisations to rest.<\/p>

\"donate<\/a><\/div>

The order is quite clear and assertive. Even if a nonprofit is charitable, if the income from the supply of goods and\/or services is in excess of INR 20 lakhs during any financial year, GST will be applied on their products or services. The burden of paying this GST will be on the consumer. However, it does add to accounting and compliance-related costs for the nonprofit.<\/p>

Are there any exemptions to this ruling? <\/strong><\/p>

Certain ‘charitable activities’ as defined under the GST Act are exempt from this indirect tax, regardless of the size of their fee-based turnover.<\/p>

Unfortunately, the list ‘charitable activities’ under the GST Act is very narrow and restrictive, and only covers activities relating to:<\/p>

(i) Public health by way of:<\/strong><\/p>

(A) care or counselling of<\/p>