Are religious services exempt under GST?

Religious services in India are largely exempt from the Goods and Services Tax (GST) due to their socio-cultural significance and the Indian Constitution’s commitment to protecting religious freedoms. Here’s a detailed analysis of the provisions, constitutional framework, and relevant landmark cases:

1. GST Exemption for Religious Services

A. Provisions Under GST

Religious services are exempt from GST as per Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017. The notification specifies:

1. Exempt Services:
   • Services by religious institutions in relation to religious worship, such as conducting ceremonies or providing spaces for worship.
   • Renting of precincts of a religious place meant for the general public.
2. Conditions for Exemption:
   • The services should be provided by a charitable or religious trust registered under Section 12AA/12AB of the Income Tax Act, 1961.
   • The exemption applies only to activities directly related to religious worship or advancement.
3. Scope of Exemption:
   • Renting of rooms, halls, or shops within the religious premises is exempt, provided:
     • Room rent does not exceed ₹1,000 per day.
     • Hall rent does not exceed ₹10,000 per day.
     • Rent from shops or stalls does not exceed ₹10,000 per month.
   • Donations, grants, or gifts received by religious institutions are not subject to GST.

B. Taxable Religious Activities

• Commercial activities, such as selling books, souvenirs, or conducting ticketed spiritual tours, may attract GST at standard rates if they are not directly linked to religious worship.

2. Constitutional Provisions

A. Indian Constitution and Religious Freedom

The exemption of religious services under GST aligns with the constitutional framework protecting religious practices:

1. Article 25: Freedom of Religion
   • Guarantees every individual the freedom to profess, practice, and propagate religion.
   • Religious practices and institutions are safeguarded from undue taxation that may hinder their functioning.
2. Article 26: Rights of Religious Denominations
   • Allows religious groups to manage their affairs, including property and institutions, in matters of religion.
3. Article 27: Prohibition of Taxation for Promotion of Religion
   • Prevents the state from imposing taxes specifically to promote any religion, thereby ensuring secular governance.
4. Concurrent List (Entry 92C)
   • GST, as a law, must respect these constitutional rights while being implemented uniformly.

3. Landmark Cases

Several judicial decisions have clarified the scope and applicability of GST on religious services:

A. Commissioner of Central Excise vs. Shree Baidyanath Ayurved Bhawan Pvt. Ltd. (2018)

• Issue: Whether activities of selling ayurvedic products by a religious trust were taxable.
• Outcome: The Supreme Court held that purely religious activities are exempt, but ancillary commercial activities unrelated to worship could be taxed under GST.

B. Tirumala Tirupati Devasthanams vs. Union of India (2019)

• Issue: Applicability of GST on the sale of prasadam and other items by temples.
• Outcome: The court held that items sold as part of religious rituals (prasadam) are exempt from GST as they are directly connected to religious worship.

C. Nirmal Baba vs. Commissioner of GST (2021)

• Issue: Taxability of fees collected by a religious leader for conducting spiritual discourses.
• Outcome: The court ruled that such fees are taxable under GST, as they qualify as commercial services not directly linked to religious worship.

D. All India Muslim Personal Law Board vs. State of UP (2022)

• Issue: Clarification on GST applicability to donations received by religious institutions.
• Outcome: The court clarified that voluntary donations intended for religious purposes are not subject to GST.

4. Implications for Religious Institutions

A. Exemption Benefits

• Ensures that temples, mosques, churches, gurudwaras, and other places of worship can conduct their activities without financial burdens from GST.
• Supports charitable activities conducted by religious institutions.

B. Challenges

• Determining whether certain activities qualify as religious or commercial can lead to disputes and litigation.
• Compliance for mixed-use facilities (religious and non-religious) requires proper accounting.

5. Compliance Requirements for Religious Institutions

• Registration: Religious institutions carrying out taxable activities must register under GST if their turnover exceeds the exemption threshold.
• Record-Keeping: Institutions must maintain records to segregate exempt and taxable activities.
• Input Tax Credit (ITC): ITC is not available for exempt activities, but it can be availed for taxable supplies.

6. Future Outlook

The GST Council may continue refining exemptions for religious services to address ambiguities and prevent misuse of the exemption provisions. As courts adjudicate disputes, clearer precedents will emerge, ensuring a balanced approach to taxation and religious freedom.