A charitable trust is a trust organised to conduct charitable activities viz. educational activities, medical activities or activities for the general advancement of society. Notification No. 12/2017 – Central Tax (Rate) dated 28th June 2017, exempts services provided by entity registered under Section 12AA of the Income-tax Act, 1961 by way of charitable activities from whole of GST vide entry No. 1 of the notification, which specifies that “services by an entity registered under Section 12AA of Income-tax Act, 1961 by way of charitable activities” are exempt from whole of the GST.
To promote awareness for its causes and to ensure audience participation, a number of times, charitable trusts organise marathons and running events.
Similar was the case of M/s. Dream Runners Foundation, which was a charitable organisation engaged in the promotion of health care, rural development and women empowerment, amongst other things. They organised a marathon called ‘Dream Runners Half Marathon’ for which donations were received from corporates and other enthusiastic participants. The donations were utilised for the organisation of the event including cleaning and distribution of T-shirts etc.
With such collection comes the question of taxability of such fee: whether such donations received for organisation of the marathon shall be chargeable to GST, given that M/s. Dream Runners Foundation was registered under Section 12AA of the Income-tax Act, 1961?
The organisation filed for an advance ruling, in order to determine the taxability. The Authority for Advance Ruling (AAR) ruled that only the activities in nature of charitable activities as define as per Clause 2(r) of Notification 12/2017 shall be exempt from GST and as a result, fees collected for organisation shall be chargeable to tax. [103 taxmann.com 253 (AAR-Tamilnadu)]
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