Dear SRRF Dialogue Members,
Greetings from SRRF!!!!
We have received following query form Mr. Sunil Kumar Suryavanshi on “Applicability of Service Tax on Grants”. Kindly give your responses.
Dear Members
Kindly provide suggestion on Service Tax applicable on NGOs on receipts of funds as below:
| Particulars |
Applicable or Not |
| Fund receipts as a Grants |
? |
| Fund receipts as contracted service |
? |
| Fund receipts from Central Govt. or State |
? |
| Govt. or its Institution (Zila /Janpad Panchayats, Nigam, collectrate office, Govt.Commission offices etc) |
? |
| Fund receipts on reimbursement basis for organise event and original bills submitted to funder |
? |
With Regards
Sunil Kumar Suryavanshi
Thanks Mr. Subhash Mittle. Yours is very useful comments
Thanks Mr. B V Soma Sastry for giving such good clearification.
Dear All
Thanks for support. It is helpfull to us.
With Regards
Sunil Kumar Suryavanshi
Manager Accounts
Samarthan-Centre for Development Support
36 Green Avenue, Chuna Bhatti, Kolar Road,
Bhopal (MP) 462016
Kindly also provide opinion for funds given to NGO as donation for conducting Doctors training or Doctors conference on specific treatment like Hemophilia, Heart surgery, or orthopedic or Occupational treatment etc.
Colombowala Zulkef
Dear Zulkef,
Any donations given towards any workshop, whether for doctors or otherwise, would be treated as donation. I think your query has already been answered by other comments.
However I would like to share a relevant decision by Delhi ITAT Tribunal, it decided that organising a conference of doctors in a five star hotel cannot be a valid ground for denying charitable registration to a trust to undertake research in medicines. [Heart Care Management vs Director Exemptions (Delhi)-May 31 2012]
In fact in the same judgement tribunal decided that the tax authorities could not regard an activity as commercial simply because the charity received donations from a corporate entity after deduction of TDS.
I thank Deepak Bansal, FCA for sharing the relevant decision with me.
rgds
Dear All
Thanks, it is really helpful to us. Kindly provide also point number 2,3,4,5 objections. i.e.
Fund receipts as contracted service
?
Fund receipts from Central Govt. or State
?
Govt. or its Institution (Zila /Janpad Panchayats, Nigam, collectrate office, Govt.Commission offices etc)
?
Fund receipts on reimbursement basis for organise event and original bills submitted to funder
?
Hello Dialogue members !
I believe Soma has already covered the applicability of service tax on grants in an exhaustive manner. This is to supplement what he has said.
Giving grants is not a taxable activity. The confusion whether grants are subject to service tax arose because commercial training and coaching is a ‘taxable activity’ subject to service tax. Hence clarifications were sought from the Dept. if GRANTS & DONATIONS rec’d by a charitable entity imparting free livelihood training to the poor and marginalised will be subject to service tax.
Dept clarified the matter through a circular (No. 127/09/2010 – ST) dt 16-8-2010 issued by Tax Research Unit of Service Tax dept. It stated that for service tax to be applicable, there should be a link between ‘consideration’ (donation & grants) and service (training). It is assumed that a donation or grant in aid is not specifically meant for a person receiving such training or for that activity, but is in general meant for the charitable cause champinoed by the charitable entity. It further states that there is no relationship other than universal humanitarian interest between the provider of donation / grant and the trainee. In view of the same service tax is not applicable on grants, even where these grants are for otherwise taxable service, since there is no link between the grant or the trainee or training.
Perhaps by including the last word ‘training’ in its clarification, the circular has created a bit of confusion. Since often grants also provide budgets which include the type of training, etc. to be provided. In this regard I believe two aspects are important
(1) there is no one to one relationship between service provider and service receiver (i.e. trainee)
(2) that the objective of grant is to undertake the activity on a humanitarian grounds and that there should be no commercial motive.
If the above conditions can be satisfied, than the Service Tax should not be levied. Hope the above is helpful and has not further complicated the issue.
subhash mittal
No service is applicable on grant as per govt rule.
Finance Officer
CSD Iindia
I think there is no service tax as no service is being provided against this grants.
Manoj Mittal
Dear Mr. Sunil,
Greetings from Hyderabad!
Service Tax has been a contentious issue for the NGOs. This topic came up for discussion previously also in the forum. Please note the following:
1. The exemption has been given to only those NGOs which are registered under section 12AA of the Income Tax Act, 1961 and carrying on one or more of the following charitable activities:
(1) NGO engaged in public health by way of –
(a) care or counseling of (i) terminally ill persons or persons with severe physical or mental disability, (ii) persons afflicted with HIV or AIDS, or (iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or
(b) public awareness of preventive health, family planning or prevention of HIV infection;
(2) NGO engaged in advancement of religion;
(3) NGO engaged in advancement of educational programmes or skill development relating to,-
(a) abandoned, orphaned or homeless children;
(b) physically or mentally abused and traumatized persons;
(c) prisoners; or
(d) persons over the age of 65 years residing in a rural area;
(4) NGO engaged in preservation of environment including watershed, forests and wildlife; or
(5) NGO engaged in advancement of any other object of general public utility up to a value of twenty five lakh rupees in a financial year subject to the condition that total value of such activities had not exceeded twenty five lakh rupees during the preceding financial year.
2. Project grants and restricted funds shall not be treated as service. However, if the grant agreement has any clause where any benefit or business value is going back to the donor, then it shall be treated as a taxable service. Some example of such benefit could be as under :
(i) If the donor puts a clause that the implementing organisation has to display its logo or name at the places of activity, then it could be considered as a taxable service.
(ii) If the implementing organisation is conducting some research, survey or activity in which the donor is interested and the implementing organisation is under obligation to provide certain specified output to the donor, then the services can be considered as taxable services.
(iii) For example, if the donor keeps a condition that the implementing organisation shall provide activity report or utilisation statements, then it will not be treated as taxable service. However, if the donor keeps a condition that the implementing organisation shall provide specific data or specific research report as an outcome of the activity, then it will be treated as a taxable service
There is a separate negative list of items exempt from service tax. In addition to this there is a gazette notification issues by the Ministry of Finance, Department of Revenue.
Thanks and regards,
_____________________________________
B V Soma Sastry
Director – Finance and Admin
Centre for World Solidarity
12-13-438, Street No. 1, Tarnaka
Secunderabad 500 017
Andhra Pradesh