Special Story — Charity and Mutuality under GST : CA Abhay Desai

Special Story — Charity and Mutuality under GST 

Charity and Mutuality  

under GST 

CA Abhay Desai

Introduction 

1. Charity and mutuality are age-old  concepts. The former is done as an  act of benevolence. The latter is an  arrangement to achieve a common  purpose. One undertaking such acts,  therefore, needs to appreciate the  implications under the GST laws to  avoid any undue demands in future.  This is more relevant for the reason that  GST if found leviable but not collected  will add as a cost for such persons who  may not have intended to derive any  personal gain from such action. In the  present article, we shall discuss several  facets of the given two concepts. 

Charity 

2. Charitable entities are per se not  unconditionally exempt from GST.  Sec. 9(1) of the CGST Act, 2017 or  Sec. 5(1) of the IGST Act, 2017 provides  for the charge of tax on the supply of  goods or services or both and the tax  shall be paid by the taxable person.  

3. The term “person” as defined u/s 2(84)  of the CGST Act, 2017 includes trust as  well as every artificial juridical person.  The term “taxable person” has been  defined u/s 2(107) of the said Act to  mean a person who is registered or  

liable to be registered. Hence charitable  entities will be regarded as “person”  under the GST law. Further the  same may be regarded as a “taxable  person” if they are registered or liable  to be registered either on account  of the aggregate turnover exceeding  the threshold limits or on account of  the entity covered under compulsory  registration u/s 24. 

4. The scope of supply has been provided u/s 7 of the CGST Act, 2017. Essentially  the said scope has the following three  elements viz. 

(a) supplies involving consideration  made in the course or furtherance  of business; 

(b) activities specified in Schedule I,  made or agreed to be made without  a consideration; 

(c) import of services for a  consideration in the course or  furtherance of business; 

5. Therefore the supplies involving  consideration can be brought to tax  only if the said supplies are made in  the course or furtherance of business.  In other words, supplies involving  consideration not made in the course  

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Special Story — Charity and Mutuality under GST  

or furtherance of business cannot be  brought to tax. 

6. Now the term “business” has been  defined u/s 2(17) of the CGST Act,  2017 to include any trade, commerce,  manufacture, profession, vocation,  adventure, wager or any other similar  activity, whether or not it is for a  pecuniary benefit. Said transactions  stands included as “business” whether  or not there is volume, frequency,  continuity or regularity of such  transaction. The definition also further  includes any activity or transaction  in connection with or incidental or  ancillary to the main transactions. continue