Dear Members,
We have received grant Rs.10 Lacs in 28th August 2015 from foreign source for a specific project and deposited in FCRA account. The said amount is not inclusive of service tax.
Q.1 What amount to be deposited? Is it direct 14% of Rs.10 Lacs ?
Q.2 When to be deposited?
Q.3 Is service tax deposited from FCRA account?
Q.4 How we will intimate the donor?
Q.5 What should be the utilization amount shown to donor i.e., (10lacs-service tax) or (10 lacs).
Please advice.
Ashok Mishra
SNS Foundation
I have another connected question to Ms BV Soma Sastry on your point no.5.
Some organisations create Chairs after the donors name eg. ICRIER has a chair called Infosys Chair for …..
Could you advise treatment of such donations ? Service tax ?
Best,
Wikky Katyal
Please note donations received is not a service, hence no service tax is applicable on the same. However grants fall in a rather grey area. Most organisations that I have come across do not treat grants as service and hence do not pay service tax. One of the argument normally forwarded is that if we pay service tax and if also subjected to TDS by the donor, amount of grant available for implementation is only around 75%, thus defeating the whole purpose of the grant.
However without getting into the emotional arguments of being an NGO, etc., I would suggest take your specific case to an expert and get a formal opinion on applicability of Service Tax. In this regard your donor agreement would be very important document.
As per the recent amendment in the service tax laws , service tax is to be deposited by the payer (person availing the services) for the security services (security guards). If the organisation is not registered under the service tax rules, what is the process of depositing the service tax, will the organisation be exempted or the organisation have to get itself registered with the authorities?
Dear Ashok,
Please note the following:
1. Services by 12A registered NGOs by way of specific charitable activities do not attract service tax. Otherwise the activities have to be covered under the negative list to be exempted from Service Tax.
2. Service tax is applicable if the taxable service exceeds 10 lakhs pa
3. Activity carried out without any consideration like donations, gifts or free charities are outside the ambit of service
4. Conditions in a grant stipulating merely proper usage of funds & furnishing of accounts also will not result in making it a provision of service.
5. Donations to a charitable organization are not consideration unless charity is obligated to provide something in return e.g. display or advertise the name of the donor in a specified manner or such that it gives a desired advantage to the donor.
6. In the case of Research project 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 service.
7. Same principle will apply in case of grant given in the form of consultancy
8. The service tax rate is 14% of the services provided from 01.06.2015
9. ST can be deposited from FCRA account
Thanks and regards,
B V Soma Sastry