Often, people looking to register an NGO are not clear about GST and whether their NGO is applicable for GST or not. The article provides information about the same and provides every aspect of GST and its types to know why GST is appropriate or not.
The Acronym of GST is Goods and Services Tax. On 1st July 2017, the Indian government launched GST. It is a type of indirect tax that has replaced the existing taxes such as VAT(Value Added Tax), exercise duty, etc. Generally, goods and service providers are liable to pay GST. You have to pay GST as there is no regime to purchase goods without paying GST. Every business with more than ₹40 lakhs and service provider with more than ₹20 lakhs needs to sign up for the GST registration. And the GST registration required for NGOs is mandatory once your turnover crosses the limit of ₹40 lakhs or ₹20 lakhs, depending upon whether you are a manufacturer or service provider.
In some states like Jammu and Kashmir, Himachal Pradesh, Uttrakhand, and northeastern areas, the annual turnover is ₹10 lakhs. If you supply goods to another state, you need to register GST for that state. GST can be registered online or offline. Exports are zero-rated, and no tax is introduced. You need to file an export bond or letter of undertaking.
Types of GST
There are 3 types of GST:
- IGST(Integrated Goods and service tax)
- CGST(Central Goods and service tax)
- SGST(State Goods and service tax)
IGST(Integrated Goods and service tax) is imposed when the goods and services have been transported interstate. E.g., when a company imports goods from another state.
SGST(State Goods and service tax) is when the goods and services tax is more than one, e.g., VAT, sales tax, or entry tax. The state can claim the revenue generated from the tax.
CGST(Central Goods and service tax) is imposed when the transaction takes place within a state, e.g. State tax, CST, SAD
If the transaction is between one state to another state, this is known as an intra-state transaction, and then CGST and SGST will be imposed. Because you know that India is a federal country where the central government and state government have respective powers, you see that double tax is charged here.
If the transaction is between one state and the same or particular state, this is known as an inter-state transaction; then only IGST will be imposed.
Rates of GST in India
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Under 5 per cent
This includes all home essentials such as sugar, edible oil, wheat, rice, spices, tea, etc.
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Under 12 per cent
This includes computers, mobile phones, all the processed food such as ghee, butter, and snacks, and your clothes such as school uniform and other items such as footwear and undergarments, etc.
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Under 18 per cent
All the chemical-based products include shampoo, soap, detergent, toothpaste, hair oil, etc.
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Under 28 per cent
This includes all the luxurious items such as Air Conditioners, luxury cars, etc.
On this basis, the government takes all the GST on the goods and services. More things to add are sometimes GST-free, including vegetables, fruits, plant saplings, plant seeds, etc.
Why Is GST Important?
Goods Service Tax is very important as it is transparent; you can see all the taxes included in the transaction, you can see every minute detail state government has taken this per cent, the central government has taken this per cent, and all the things are clear.
You got to know that every business, whether manufacturer or service provider, needs to be a registered GST unless exempt(out form a liability imposed) or NIL rated by the GST council. GST could be applicable in some services and goods, but in others, it is exempted.
Let’s find out how.
An NGO will be exempted from GST when it satisfies these two criteria:
- The service provided by the NGO must be charitable.
- The NGO must be entered under the SECTION 2AA of the INCOME TAX ACT.
But not every charitable service provided by NGOs is exempted from GST. Only these charitable services provided by NGOs are exempted from GST.
If it is related to health like:
- Services relating to public health like People who have HIV, TB(Tuberculosis), or any other disease.
- Advancing the deaddiction centre and advertising this major problem
Advancement in education and personal awareness, encouragement of religious belief, spirituality, and yoga, protection of the natural growing forests, preservation of wildlife, etc., are all the goods or services exempted from the GST.
A charitable trust run schools, colleges, orphans, physically and mentally unhealthy person or 65 plus age people whole income is exempted in that case
One question you might ask is whether the goods provided by the charitable trust are free to form exempted from the goods, so yes, every good that comes under these conditions is free exempted from GST.
But if an NGO starts an educational program and charges fees for it, or if NGO is donating a good for the money, this case should also be considered.So, if it is not free for the consumer, it will be considered a commercial activity and must submit the GST.
NGOs are also exempted in these cases:-
- If an NGO wants to deliver mid-day meals in a government school.
- Helping in the transportation of children and staff.
- Keeping a sweeper in school.
- Conducting exams and opening admissions to schools like these services
- GST is also exempted if you are donating to charity.
Conclusion
This article consists of all the necessary and minute details you need to know if you are opening an NGO and do not know what GST or any other taxes are and why you have to pay them without any reason.
After all this, a customer has to pay all the taxes imposed. Customs duty is the only tax not imposed in GST. As we have mentioned, GST is to be paid by every business or organisation, but there are some exempt; if you do some of them, you do not have to pay any GST, but it must be a contribution to charity, and even not all the contribution related to charity are exempted from GST you must follow all the condition which you need to follow to exempt the GST.
Also, if it is a charitable contribution and satisfies the given condition, but you charge for it from the consumer, this comes under the commercial, and then you must submit GST. A lawyer or professional to deal with all GST-related tasks. Vakilsearch provides services in every law sector with less price from the market. Check out the website to choose the best service.
