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. Any person who engages in economic activity including trade and commerce is treated as a taxable person. Person includes individuals, HUFs, companies, firms, LLPs, an AOP / BOI, any corporation or government company, body corporate incorporated under laws of foreign country, co-operative societies, local authorities, governments, trusts, artificial juridical persons.
All charitable organisations need to register under GST if their annual turnover from sale of goods and services is above 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.
Certain charitable activities as defined under the GST Act are exempt from GST, regardless of the size of their fee-based turnover. Covers activities relating to:
(i) Public health by way of:
(A) care or counselling of
terminally ill persons or persons with severe physical or mental disability,
persons afflicted with HIV or AIDS,
persons addicted to a dependence-forming substance such as narcotics drugs or alcohol;
(B) public awareness of preventive health, family planning or prevention of HIV infection;
(ii) Advancement of religion, spirituality or yoga
(iii) Advancement of educational programmes or skill development relating to:
(A) abandoned, orphaned or homeless children;
(B) physically or mentally abused and traumatised 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
Therefore, if a nonprofit provides counselling services to terminally ill persons for a fee, and the income generated from these services is over INR 20 lakhs in a given financial year, it is exempt from charging GST on the service it provides. However, it is still liable to register under GST, in order to claim this exemption.
For example, if the nonprofit operates from a commercial office space, it cannot flash its 12A or 12AA certificate to the landlord and claim exemption from GST on rent. While buying products such as computers, laptops, tablets, or a vehicle for the nonprofit’s charitable activities, it’s so-called tax-exempt status does not offer any cover against GST.
A person who is required to pay tax under reverse charge has to compulsorily register under GST, and the threshold limit of INR 20 lakhs is not applicable to such a person. Reverse Charge Mechanism (RCM) applies to nonprofits in the following situations:
(i) If a nonprofit wishes to engage the services of a lawyer, and the lawyer charges a fee for his services, the nonprofit must first register itself under GST, and pay GST.
A number of advocacy organisations regularly require legal services. The GST Act not only places a compliance burden on such organisations, but also adds to the cost of delivering their programmes since they have to pay the GST upfront. Nonprofits and their funders must become cognisant of these implications of the GST Act on their budgets and fundraising targets.
More details at https://www.gst.gov.in