Hi,
We (GVNML organization having state registration that is 1958, society and 12 AA ) also and we had did IEC activities (community participation in drinking water supply to 265 villages) we need to pay service tax. We are getting payments from Govt. (PHED Deptt.) as contractor. Are we under service tax? Pls guide me.
Regards
Jagveer Singh
Dear All,
Soma has already dealt with the issue of applicability of Service Tax, hence I am not going into this issue.
That said, I would want to add, that the question of applicability of Service Tax would depend on the nature of the agreement, under which the service is provided by the NGO.
As a Society, with 12AA registration, if there is a possibility to get the agreement structured as an “Agreement of Grant”, then it will be out of the purview of service tax as well as TDS. This would depend on the possibility for negotiation with PHED departments and educating them of the implications of structuring the agreement as a service contract. This is based on my experience of taking it up, few years back, with one of the State level Health Care Organization, setup under the NRHM, towards training activity and getting the contract restructured as a “Grant Agreement”.
Best regards
Sriraman
Dear All,
Greetings from Hyderabad!
The service tax is becoming a contentious issue for NPOs. The circular issued by GoI No. 25/2012-Service Tax, New Delhi, the 20th June, 2012 says “Services by an entity registered u/s 12AA of Income Tax Act 1961 by way of charitable activities is exempt from levy of Service Tax”. However, the Service Tax laws have taken a narrow definition of the term ‘charitable purpose’ which is different from the definition of charitable purpose under the Income Tax Act which implies that most of the organisation engaged in “advancement of any other object of general public utility” shall not be covered under exempt category.
Based on the above circular there are apprehensions that major activities of NGOs like Developmental Activities, IG Programmes, Research & Development, Dissemination of knowledge, Poverty Alleviation, General Health care, etc are not exempt for Service Tax.
It also implies that Service Tax laws will not apply to the general charitable activity of NGOs even if, they are not covered under the definition of the term ‘charitable purpose’. It needs to be understood that service tax law will apply only when an NGO has provided services against fees or consideration. In other words, the following may be noted :
1. NGOs will not be affected for engaging in any kind of charitable activity, unless they charge fee or consideration.
2. NGOs which are covered within the definition of the term ‘charitable purpose’ as per service tax laws, will not be covered under Service Tax even if they are providing taxable services.
3. NGOs which are engaged in “advancement of any other object of general public utility” shall be covered under Service Tax law if they are providing taxable services in excess of ` 25 lakhs.
4. The Service Tax Act has made all services taxable except those services which are specifically exempted. Under the new law, almost all services rendered by NGOs on commercial basis or on consultancy contract shall become taxable.
I have tries to refer some publications on this. For me personally, this is a very confusing issue.
Thanks and regards,
_____________________________________
B V Soma Sastry
Director – Finance and Admin
Centre for World Solidarity
Dear Mr Jagveer Singh,
As per Notification No 25/2012 dated 20.6.2012 Services by an entity registered under section 12AA of the income tax Act by way of charitable activities alone exempt from service tax.
Construction or laying of water pipe lines gets exempted under Para 12 of the same notification. Any person rendering any contractual service to Govt. agencies is not liable to service tax.
It need not be a charitable institution under section 12AA of the IT act.. Para 12 of the notification reproduced below:
12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
(b) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);
(c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or
(f) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act;
Hope this clarifies
B.Gopalakrishnan