NEW DELHI: In a setback to several charitable institutions, the Tamil Nadu Authority of Advance Ruling (AAR) has held that conducting marathons by a charitable trust registered under the Income Tax Act does not exempt them from GST liability as only activities covered under definition of “charitable activities” under a 2017 notification are exempt.
In response to a reference by Dream Runners Foundation, the AAR found that the entity needed to be registered under the central and state GST laws as it was making taxable supply of services such as organising marathon, while noting that its aggregate turnover in a financial year exceeded the prescribed Rs 20 lakh. The authority said that the money collected from participants was a consideration towards the supply of service of organising and conducting the marathon and was liable to incur GST.
It noted the petitioner’s plea that net proceeds are donated to Freedom Trust, an NGO providing prosthetic limbs to less privileged people. It observed that the money collected from the participants could be donated or used for further charitable activities, but organising marathon was a separate supply of service for the participants.
“So long as the definition of supply, business and turnover threshold is met, GST will become applicable, irrespective of the main objective being non-taxable. This advance ruling provides another example of why organisations should view all their commercial activities afresh from a GST lens, to ensure that tax is being paid wherever it is due,” said Harpreet Singh, indirect tax partner at consulting firm KPMG.