Under Section 7 of the CGST Act, 2017, "supply" includes:
All forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease, or disposal
Made or agreed to be made for a consideration in the course or furtherance of business
Hence, if an NPO is engaged in supplying goods or services for a consideration, it may fall under the ambit of GST.
According to Notification No. 12/2017 - Central Tax (Rate) dated 28th June 2017, “charitable activities” for GST purposes include:
Public health services (e.g., yoga, therapy, rehabilitation)
Advancement of religion, spirituality, or yoga
Advancement of educational programs or skill development
Relief to the poor, including distributing food, clothing, or shelter
Preservation of the environment (e.g., forest and wildlife protection)
Only these activities are exempt from GST. If an NPO performs activities beyond this scope (e.g., paid training, commercial rentals), GST is applicable.
GST registration is mandatory if the aggregate turnover exceeds ₹20 lakh (₹10 lakh for special category states) in a financial year.
Aggregate turnover includes:
All taxable supplies
Exempt supplies
Exports
Inter-state supplies
If the NPO's income is entirely from exempt charitable activities, then GST registration is not required, even if turnover exceeds the threshold.
However, if the NPO also earns income from taxable sources (e.g., renting halls, sale of goods, ticketed events), it must register under GST once the threshold is breached.
Voluntary registration is also allowed even if turnover is below the threshold.
| Activity | GST Applicability | GST Rate |
|---|---|---|
| Free health services | Exempt | 0% |
| Free education | Exempt | 0% |
| Yoga classes (as spiritual activity) | Exempt | 0% |
| Renting premises for public | Taxable | 18% |
| Renting premises for religious events (if general public has free access) | Exempt | 0% |
| Sale of goods (e.g., books, souvenirs) | Taxable | 5% to 18% |
| Organizing training/workshops with fees | Taxable | 18% |
| Food distribution under government schemes | Exempt | 0% |
| Advertisement services | Taxable | 18% |
Registered NPOs are allowed to claim Input Tax Credit on inputs used for taxable services. However, ITC is not allowed on:
Inputs used for exempt services
Activities for personal consumption
Goods/services used exclusively for charitable purposes that are exempt
If an NPO provides both exempt and taxable services, it must reverse proportionate ITC used for exempt services.
For the purpose of GST, the place of supply determines whether it is an intra-state or inter-state transaction. Based on this:
Intra-state supply attracts CGST + SGST
Inter-state supply attracts IGST
NPOs conducting activities across multiple states may require separate registration in each state where they provide taxable services.
As per Entry No. 1 of Notification No. 12/2017 - Central Tax (Rate), services provided by an entity registered under Section 12AA or 12AB of the Income Tax Act are exempt from GST only if:
The services are charitable activities as defined
The consideration charged is nil or nominal
Other applicable exemptions:
Renting of religious places for the general public (not for business/commercial purposes) is exempt
Conducting religious ceremonies or festivals is exempt
A charitable trust running a free school for underprivileged children
An NGO conducting free yoga camps open to all
A religious organization renting halls for public religious gatherings
Renting a hall for a marriage or private event
Conducting paid yoga classes or corporate wellness programs
Selling merchandise or running a gift shop
Donations are typically not subject to GST if:
There is no quid pro quo (i.e., nothing is given in return)
It is a pure donation without any material benefit to the donor
However, if a donation is linked to some benefit (e.g., donor gets advertising, naming rights, or free services), it could be considered consideration for supply and be taxable.
NPOs registered under GST must comply with regular filings:
GSTR-1 (outward supplies)
GSTR-3B (summary return)
Annual return (GSTR-9) if turnover > ₹2 crore
They are also subject to audit provisions under the CGST Act if thresholds are met.
Section 12AA/12AB of Income Tax Act: Only trusts registered under these sections are eligible for GST exemptions on charitable activities.
CSR Activities: Corporate Social Responsibility (CSR) activities may be liable to GST, especially if NPOs receive funds for conducting services in return.
Foreign Grants and Donations: If NPOs receive foreign grants without any supply of goods or services in return, GST is not applicable. But if any service is rendered, GST may be applicable.
Failure to register or file returns under GST can attract penalties:
₹10,000 or amount of tax evaded (whichever is higher)
Late fees for delayed filings: ₹50 per day (₹20 per day for nil returns), up to ₹5,000
Non-Profit Organizations play a critical role in society by delivering services that often complement government efforts in education, healthcare, environment, and social welfare. While their intentions are charitable, the GST law in India applies based on the nature of activities, not on the organization’s status alone.
If an NPO engages in pure charitable activities, especially as defined under the GST notification, it enjoys full exemption. However, if it earns revenue through rentals, sales, paid events, or any other form of business/commercial activity, it becomes liable to register and pay GST (subject to threshold limits).
It is essential for NPOs to:
Understand the scope of charitable exemptions under GST
Maintain clear records separating exempt and taxable activities
Register under GST if the threshold is breached
File timely returns and claim eligible ITC for taxable operations
Proper GST compliance ensures both legal certainty and reputation integrity for NPOs. For tailored advice, it’s best to consult a tax professional or GST practitioner, especially where multiple activities and revenue streams are involved.
Aradhna Singh
Ca Intern