Impact of GST on Temples

Impact of GST on Temples

India is a religious country. There will be a temple in every line of the street. The temples are considered as holy and it is important to note that such temples are also governed by some laws. A temple can be registered under section 12AA of the Income Tax Act, 1961. The primary discussion in this article we are going to do is “whether GST is applicable on the temples or not?”. The answer from the majority would be ‘NO’, since temples are not doing business, they don’t make supplies etc., But if we dive deep into the provisions of GST, the answer could turn around. Let us answer these questions in an order to analyze the impact of GST on temples.

Temples under Trusts

Normally temples are being managed by the trusts. The incomes of the temples will be accounted in the books of trusts. For example, TTD is the trust which manages the Tirumala temple and Shri Saibaba Sansthan Trust manages the Baba Temple in Shirdi. Therefore, when we are talking about the taxability of income of temple, we are actually talking about the taxability in the hands of trust. Trust is the person which has to get registered in laws like Income Tax Act or Indian Trusts Act.

In some cases, trust manages more than two temples. In such cases, we’ll determine the registration requirements of trust based on the incomes of all such temples, irrespective of whether the temple is small or big. If any exemption is applicable to the trust, it means, such exemption is applicable to all the temples under such trust. Thus, the purpose of this article is to see taxability of income earned by temples which has been accounted in the books of trusts.

GST APPLICABILITY

GST is levied on supply of goods or services. Generally, we start our discussion with the definition of supply. But, in case of temples, the first question that arises is “whether the activities done by temple are considered as business under GST?”. Thus, we will start out discussion with the definition of supply itself.

What is Business?

Section 2(17) of Central Goods and Services Tax Act, 2017 (hereinafter referred as CGST Act, 2017) states that “business includes any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit”. The definition of the business seems vast and it includes every kind of activity whether or not for pecuniary benefit. The Cambridge Dictionary defines ‘pecuniary’ as relating to money.

Therefore, the definition of business can be constructed as any activity whether or not for monetary benefits. Thus, even though there will be no monetary benefits arising to the temple, the same cannot be said as outside the ambit of ‘business’ under GST.

What is a Supply?

In terms of section 7 of CGST Act, 2017 “supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business”

Section 2(102) defines services as “services” means anything other than goods. The activities a temple would form part of service as it includes everything other than goods.

Thus, the activities of a temple are satisfying the criteria mentioned under section 7 and the same will be considered as supply henceforth:

1. Supply of service
2. Made for a consideration
3. By a person (as temple is under a trust)
4. In the course or furtherance of business.

Exemption for Temples:

As the implied intention of GST is to tax only the commercial purposes, most of the services provided by the temples are covered under exemption. In terms of Entry 1 of Notification 12/2017 – CTR “Services by an entity registered under section 12AA of the Income-tax Act, 1961 by way of charitable activities”. The definition of charitable activities includes “advancement of religion, spirituality or yoga”. Thus, any service provided by the temple under a trust, which is registered in accordance with 12AA of the Income Tax Act, by way of advancement of religion is exempt.

What does advancement of religion mean?

The term “advancement of religion” has not been defined under any Act. But in the case of “S.M.N. Thangaswami Chettiar vs Commissioner of Income-Tax AIR 1966 Mad 103”, the Madras High Court has held that:

“The courts in India have, in relation to Hindu Wills and gifts, adopted the technical meaning of charitable trusts and charitable purposes which the courts in England have placed upon the term " charity" in the Statute of Elizabeth. All purposes which are charitable according to English law will be charitable under Hindu law. But in addition, under the head of advancement of religion, there are other charitable objects in Hindu law which will not be charitable according to English law; for that law forbids bequests for what are termed superstitious uses, a restriction which does not apply to grants of this character in India, even in the Presidency towns, and such grants have been repeatedly enforced by the Privy Council. What are purely religious purposes and what religious purposes will be charitable must of course be entirely decided according to Hindu law and Hindu notions”

The judgement has also not concluded the meaning of advancement of religion. So, it is upon us to determine what activities are considered for advancement of religion. When we refer the definition of “advancement” in Merriam Webster, it states that “the action of promotion or elevation to a higher rank”. The definition of ‘religion’ is given in the judgement of “The Commissioner, Hindu Religious Endowments, Madras vs Sri Lakshmindra Thirtha Swamiar of Shirur Mutt 1954 SCR 1005”. The Supreme Court in the said case has defined the religion as:

“Religion is certainly a matter of faith with individuals or communities and it is not necessarily theistic. There are well known religions in India like Buddhism and Jainism which do not believe in God or in any Intelligent First Cause. A religion undoubtedly has its basis in a system of beliefs or doctrines which are regarded by those who profess that religion as conducive to their spiritual wellbeing, but it would not be correct to say that religion is nothing else, but a doctrine or belief. A religion may not only lay down a code of ethical rules for its followers to accept, it might prescribe rituals and observances, ceremonies and modes of worship which are regarded as integral parts of religion, and these forms and observances might extend even to matters of food and dress”

Therefore, anything which has been done to promote the religion, rituals, ceremonies etc., can be considered to be made for advancement of religion. For example, Entry fee collected by temples for admission into the temples, Pooja tickets sold by the trusts in the temples etc., are considered as services provided for advancement of religion.

Taxability of Incomes received by Temples

As it has been determined that the activities of temples are considered as supply under GST, now we’ll look into the taxability of its supplies. The temple could earn income in the form of gifts or donations i.e. most of the temples receive income from devotees in the form of gifts (hundi). Apart from that, there could be other incomes too like renting of premises, renting of community halls, sale of prasad, sale of other items like books (Gita), god photos, idols and other decorative items. Let us analyze the taxability of all these incomes under GST.

1. Donations or Gifts from Devotees

In terms of section 2(31) of CGST Act, 2017 “consideration in relation to the supply of goods or services or both includes any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person”. When we look into the definition of consideration carefully, it says that consideration should be made for the supply of goods or services. Therefore, if any amount is received for which no service has been rendered, it won’t fall under the definition of consideration. If there is no consideration, there would not be any supply too (except of Schedule I items).

Normally, donations or gifts in hundi by the devotees are spiritual in nature. The devotees will not expect anything in return from it. So, the said income cannot be made taxable under GST as there is no supply.

2. Income from Pooja activities by preachers in temple

If you are conducting any pooja in temple, the temple will charge you some amount. We cannot consider it as a donation as the service is being provided in respect of the amount charge. Therefore, it will form part of supply. Whether the GST has to be discharged in respect of such supply?

As we have already discussed, services provided by way of advancement of religion is exempt. When we refer the definition of religion above, it says that religion includes modes of worship too. Thus, the pooja activities form part of religion. Whether it can be considered as advancement of religion or not is a matter of judgement.

In the case of “Caus Lindeboom v. Camille, 1934-1 Ch 162, Luxmoore J” the British Court has expressed the opinion that “a gift for saying masses would be charitable as being for the advancement of religion and also because it enabled a ritual act to be performed, which was the central act of the religion of a large proportion of Christians”.

In church masses will be performed and chants in the temple. Therefore, a view can be expressed that “the activity of pooja can be considered as advancement of religion and hence exempt”

3. Sponsorship Services by Temples

In some cases, temples display the name or trade name of the donor in its premises for the contribution given by them either for construction of temple or for development of the same. Let us understand whether the said activity can be considered as sponsorship. Sponsorship services has not defined under GST. But when we refer Finance Act 1994, section 65(99A) defines sponsorship as follows

“sponsorship includes naming an event after the sponsor, displaying the sponsor’s company logo or trading name, giving the sponsor exclusive or priority booking rights, sponsoring prizes or trophies for competition; but does not include any financial or other support in the form of donations or gifts, given by the donors subject to the condition that the service provider is under no obligation to provide anything in return to such donors”.

In normal parlance, temples are not obliged to display the names of the donor in its precincts. But, as a matter of gratitude, temples display the names of the donors. It is same as like donations. Therefore, the same cannot be treated as supply in GST. However, when there is an obligation to display the names, the same would be taxable in GST under reverse charge.

4. Renting of Premises

Sometimes the precincts of the temple will be given on rent for the occasions like marriage, family functions etc., Whether these services are taxable under GST? In terms of Entry 13 of Notification 12/2017 – CTR, “Services by a person by way of;

1. conduct of any religious ceremony;
2. renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) or a trust or an institution registered under sub clause (v) of clause (23C) of section 10 of the Income-tax Act or a body or an authority covered under clause (23BBA) of section 10 of the said Income-tax Act

Provided that nothing contained in entry (b) of this exemption shall apply to,

• renting of rooms where charges are one thousand rupees or more per day;
• renting of premises, community halls, kalyanmandapam or open area, and the like where charges are ten thousand rupees or more per day;
• renting of shops or other spaces for business or commerce where charges are ten thousand rupees or more per month.”

The word “religious place” has been defined in the same notification as “religious place” means a place which is primarily meant for conduct of prayers or worship pertaining to a religion, meditation, or spirituality.

But the word ‘precincts’ has not been defined neither in the Act nor in the notifications. In the case of “South Eastern Coalfields vs CCE 2006(200) E.L.T. 357 (S.C.)”, the Supreme Court has defined precincts as “We have to interpret the word ’precinct’ in the exemption notification to mean the surrounding region or area, as defined in Collins English Dictionary or the surroundings or environs of a place as defined in the New Shorter Oxford English Dictionary”

The Circular No. 200/10/2016 – ST also clarified that “In view of the above, field formations may not take a restricted view of the word ‘precincts’ and consider all immovable property of the religious place located within the outer boundary walls of the complex (of buildings and facilities) in which the religious place is located, as being located in the precincts of the religious place. The immovable property located in the immediate vicinity and surrounding of the religious place and owned by the religious place or under the same management as the religious place, may be considered as being located in the precincts of the religious place and extended the benefit of exemption under Notification No. 25/2012-Service Tax, SI. No. 5(a) dated 20.6.2012”

Therefore, if the temple gives on rent, any place in or near the premises of temple, where the consideration is less than Rs. 10,000 per day, the same would be considered as exempt under Entry 13. But the said exemption is applicable only if the renting service was provided to general public. If the said service is provided to business entities, the same would be taxable under GST.

5. Renting of rooms

Temples provide accommodation facilities to the visitors by charging a minimal amount. Whether the above exemption is applicable in this case? The exemption will be applicable only in the case where the rent charged is less than Rs. 1,000 per day. Otherwise, the same would be taxable.

6. Renting of shops in front of temples

We can see a number of shops in front of temple selling coconuts and other pooja items. Temples collect rent from such vendors for utilizing the space. Whether the transaction would be exempt under Entry 13? The exemption will be applicable only if the rent charged is less than Rs. 10,000 per month.

7. Sale of Prasadam

In terms of Entry 98 of Notification 02/2017 – CTR, “Prasadam supplied by religious places like temples, mosques, churches, gurudwaras, dargahs, etc.” is exempt. Therefore, GST will not get attracted on such supplies.

8. Sale of Books

Temples like Iskcon sale books of Gita, Mahabharat etc., Whether GST will be levied on such supplies. In terms of Entry 119 of Notification 02/2017 – CTR, Printed books, including Braille books are exempt from GST. Thus, sale of any printed books would be exempt.

9. Sale of God Idols or Photos

The said of God idols or photos is classified under heading 6802 and taxable at a rate of 12%. The benefit of “advancement of religion” cannot be claimed here as the said benefit is available only for services and not goods.

Conclusion:

When we look into the GST implication of all the incomes earned by the temple, almost 90% of the incomes are exempt. But to claim such exemption benefit, the trust which manages the temples has to get itself registered under section 12AA of the Income Tax Act. Therefore, it is suggested for the trusts to get registered under section 12AA of Income Tax Act to claim the benefit of exemption.