Top Stories Charitable Institution’s Activities Prima Facie Not Classified as Supply or Business Under CGST Act: Delhi HC [Read Order] The Delhi HC temporarily restrained the order against the petitioner citing charitable activities likely not fall in scope of taxable “supply” under the CGST Act By Kavi Priya – On November 27, 2024 12:25 pm – 2 mins read The Delhi High Court observed that the activities undertaken by charitable institutions were prima facie not classified as “supply” or “business” under the Central Goods and Services Tax ( CGST ) Act. AROH Foundation, the petitioner is a charitable organization registered under Section 12AA of the Income Tax Act, 1961. The petitioner challenged a decision that said AROH Foundation’s income should be taxed under the Central Goods and Services Tax Act, 2017 (CGST Act) despite it being registered as a charitable organization. Complete Draft Replies of GST ITC Related Notices, Click Here

The judges, Justice Yashwant Varma and Justice Dharmesh Sharma observed that the respondents (tax authorities) did not question the charitable status of AROH Foundation, which is properly registered under Section 12AA of the Income Tax Act. This registration confirms that the AROH Foundation is a charitable entity and should be eligible for tax exemptions. Based on this, the Court stated it could not uphold the previous decision that had treated the foundation’s income as taxable under the CGST Act. The Court looked at Sections 7 and 9 of the CGST Act which define what counts as “supply” and how GST is applied to supplies of goods or services within a state. Section 7 of the CGST Act states that “supply” includes activities like the sale, transfer, rental, or disposal of goods or services for consideration (payment) made as part of a business activity. Complete Draft Replies of GST ITC Related Notices, Click Here The Court also observed that Section 7 includes transactions between a person and their members or constituents, even if these activities are not part of the business. This could possibly apply to some charitable activities if they involve payment in exchange for goods or services.

The Court pointed out that the law also includes exceptions where certain activities are not considered “supply” under the CGST Act including specific public authority actions listed in Schedule III of the Act. The Court explained that activities by charitable organizations are usually not considered “business activities” under the CGST Act. Since AROH Foundation operates for charitable purposes, not for business, its activities would likely not be seen as “business” under the law. The Court said that this issue needed a more detailed review. Complete Draft Replies of GST ITC Related Notices, Click Here Based on the above observation, the Court decided to restrain the order made on April 30, 2024, until further review. The case will be heard again on January 8, 2025 to allow both sides to present their arguments