Service tax liability for NGO

I have a query on service tax payment & registration:-

Our organization has got 12 AA registration.

For the car hiring charges/security charges do we need to register ourself for the service tax and do we need to pay the reverse charges or as per notification /circular no:25 we are exempted from service tax

Could u please clarify?

Ramya Haricharan

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4 Responses to Service tax liability for NGO

  1. Expert Panel says:

    Dear SRRF Dialogue Members

    Festive Greetings !!

    The Expert Panel has given their opinion on following query relating to ‘’Joint / Reverse Service Tax Charge on Societies / Trusts’’

    Ramya Haricharan asks:-
    Our organisation has 12AA registration. For car hiring charges / security charges do we need to register ourselves for service tax and do we need to pay the reverse charges as per notification 25 or are we exemtoped from service tax ? Please Clarify.

    Expert Panel says:-

    Finance Act 2012 has ushered in a new paradigm for applicability of Service Tax. Till 30-6-2012 service Tax was applicable on only those services which were specified in the Act. However effective 1-7-2012, it has become a blanket tax on anyone providing service to another for a consideration. Exceptions are covered through a negative list. NGOs (registered under S. 12AA) are covered by this negative list brought out through Notification No. 25/2012 dt 20th June 2012. (Para 34 of the Notification):

    However this response basically focuses on reverse charges.
    Notification No. 30/2012 dt 20th June 2012 covers what has been referred to as ‘Reverse Charge’ in the Query. In normal course, Service Tax is payable by the service provider. It is upto the service provider to recover the service tax cost from the person receiving the service or bear the same. However since some of the service providers (particularly transporters) were not prepared to charge service tax, concept of Reverse Charge came, whereby the companies which were receiving service were made liable to pay service tax.

    Further, the tax authorities’ experience was that often individual service providers, particularly from non-organised sector did not pay service tax, even if they had recovered the same. Hence to tighten noose around such persons, concept of Joint charge mechanism has been evolved. It basically enables the system that in case, one party does not pay the service tax, Govt. would be able to identify such persons and recover the service tax, based on return from the other party. The notification basically, that in case certain services (taxi rental, man-power supply, etc.) when performed by an individual, partnership, or an Association of Persons and provided to a business entity registered as a body corporate, then such a mechanism of ‘Joint Charge’ would be applicable.

    Thus from the above, one can deduce that Joint Charge would be applicable only if the service is being provided by an individual or a partnership firm to a ‘body corporate’. Unfortunately Service Tax / Income Tax do not define ‘body corporate’. Hence one has to refer to the Companies Act for understanding of Body Corporate. The definition is not direct, but an exclusive one, what does not constitute a body corporate. It states body corporate ‘includes a company incorporated outside India’ but excludes cooperative society or a corporation formed by Central Govt. through notification. In view of the same, in our opinion, a society or a Trust does not form a body corporate and hence the Joint Charge mechanism would not be applicable in case of a Trust or a Society. Of course it will be applicable to S. 25 companies, very much being a body corporate.

    It may be noted that the notification does specifically covers society but that is only in case of ‘Freight payable for Goods Transported by Road’.

    We thank Mr. Deepak Bansal, Chartered Accountant, for providing his inputs in resolving the above query.

  2. Gopalakrishnan says:


    Further to my earlier reply, Notification No 25 gives a mega list of services which are, though, do not find a place in the negative list, are still exempt from service tax. It is to be noticed that these exemptions are as per notification and the Central board of excise and customs may modify this list at any time. Further circular 25 exempts services rendered by charitable institutons and has no relevance for services received. For example Section 25 companies under the companies Act are exempt from tax for certain services but covered under reverse charge mechanism and they are liable to collect and pay service tax on certain services received by them. The reverse charge mechanism is going to create a lot of back office work like tds as there is no exempted limit or threshold limit beyond which only it will be applicable. Even a small amount is paid the recipient has to obtain registration number and pay the tax.


  3. Pushkar gupta says:


    As per notification 30/2012, it is charily mentioned in the notification that when service of Goods Transport Agency is received by Society registered Under Societies Registration Act, 1860, it is applicable the Service Tax under Reverse Charges Mechanism on Society and to be get registered under Service Tax.

    Pushkar Gupta

  4. Gopalakrishnan says:

    Dear Sirs,

    My opinion is

    As per notification No 30 /2012 dated 20.6.2012

    Reverse charge mechanism In respect of renting or hiring of vehicles designed to carry passengers will be applicable only to corporate entities and not for other entities.

    Therefore there is no need to register under service tax Act for the above sake.


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