As per Entry No. 6 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017;
All services provided by the Central Government, State Government, Union territory or local authority are exempt from the payment of tax, excluding the following services;
(a) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory;
(b) services in relation to an aircraft or a vessel, inside or outside the precincts of an airport or a port;
(c) transport of goods or passengers; or
(d) any service, other than services covered under (a) to (c) above, provided to business entities.
Business Entity has been defined under clause (n) of Notification No. 12/2017-Central Tax (Rate) which is extracted as under:
(n) “Business Entity” means any person carrying out business.
Business as per section 2(17) of the Goods and Services Act, 2017 is defined as under:
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and;”
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;
The question arises whether a Charitable Institute to be considered under the definition of ‘Business Entity’ or not and whether the workings of a Charitable Institute satisfies the definition of ‘Business’ as per Section 2(17) of the GST Act, 2017.
As per ruling of the Hon’ble Supeme Court of India, Commissioner of Sales Tax Vs Sai Publication fund (2002) 4 SCC 57; the tax under the Act is leviable on the sales or purchases of taxable goods by a dealer and not by every person. From the facts of the present case, the sole object of the assessee Trust is to spread the message of Saibaba of Shridi. It is also not disputed that the books and literature etc. containing the message of Saibaba were distributed by the Trust to the devotees of Saibaba at cost price. There is no dispute that the primary and dominant activity of the Trust is to spread the message of Saibaba. This main activity does not amount to “business”. The activity of publishing and selling literature, books and other literature is obviously incidental or ancillary to the main activity of spreading message of Saibaba and not to any business as such even without profit motive and it is in a way a means to achieve the object of the Trust through which message of Saibaba is spread.
It is clear from the Trust Deed and objects contained therein that it was not established with an intention of carrying on the business/occupation of selling or supplying goods. This being the position, it cannot be said that the Trust carries on the business of selling and supplying goods so as to fall within the meaning of “dealer” under Section 2(11) of the Act.
Under GST, ‘Dealer’ is not defined but it has used more generous term supplier supplying goods and services or both. A person who supplies in furtherance of his business is liable to GST. A Charitable trust is a person and makes a supply (supply definition being very wide). ‘Supply’ is defined and explained in Section 7 of GST Act, 2017; “Supply” includes—
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
The activity carried out by a charitable trust in furtherance of object of trust, and not in furtherance of business. Thus, on the basis of the decision of Hon’ble Supreme Court and the current definitions of ‘Business’ & ‘Supply’, it is obvious that entities having main object of charitable activity cannot be said to be in ‘business’.
Conclusion:- Since there is not any kind of trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity. Hence, the welfare activities by Charitable Institute are not covered under the definition of ‘Business’. Resultantly, a Charitable Institute cannot be termed as a ‘Business Entity’. Though, the topic is most likely subject to litigation. Therefore, supply of services in form of renting of immovable property by Government or a local authority to a Charitable Institute is exempt.