Are religious services exempt under GST?

Religious services in India, such as those provided by temples, mosques, churches, and other places of worship, are exempt from the Goods and Services Tax (GST) to preserve their sanctity and encourage the continuity of religious and charitable activities. These exemptions align with the broader policy of promoting public welfare while adhering to constitutional principles.

Constitutional Framework

1. Article 246A

• Empowers both the Union and State legislatures to levy GST, but it allows exemptions for religious services based on recommendations from the GST Council.

2. Article 265

• Prohibits the collection of taxes without legislative authority, ensuring GST exemptions for religious services comply with the law.

3. Article 25

• Guarantees freedom of religion, protecting religious practices from undue interference, including taxation.

4. Article 26

• Grants religious denominations the right to manage their own affairs, ensuring they can provide services without financial burdens from taxation.

5. Article 282

• Permits the Union or State governments to allocate funds for religious or charitable purposes, further reflecting the policy of exempting religious services from taxes.

GST Provisions for Religious Services

1. Exempt Services

• Services by religious trusts or charitable organizations that are registered under Section 12AA of the Income Tax Act, 1961, and engage in:
  • Conducting religious ceremonies.
  • Renting out precincts of religious places meant for the general public.

2. Conditions for Exemptions

• The exemption applies when:
  • The property rented out is integral to the religious place.
  • The rent does not exceed ₹10,000 per month (for commercial activities).

3. Taxable Services

• Certain services by religious trusts are taxable under GST, such as:
  • Catering services.
  • Sale of souvenirs or publications.
  • Renting space for commercial purposes exceeding the monetary threshold.

4. Input Tax Credit (ITC)

• Religious trusts cannot claim ITC for exempt services but can claim it for taxable activities like catering or souvenir sales.

5. GST Rates

• Specific activities not directly related to religion (e.g., commercial renting exceeding limits) attract GST at rates ranging from 5% to 18%.

Impact of GST on Religious Services

1. Positive Impacts

• Encouragement of Religious Activities:
  • Exemptions reduce the financial burden on organizations performing religious and charitable duties.
• Ease of Compliance:
  • Simplified tax structure aids smaller religious institutions.

2. Challenges

• Dual Nature of Activities:
  • Institutions engaged in both religious and commercial activities face compliance challenges in distinguishing taxable and non-taxable transactions.
• Taxation on Ancillary Services:
  • Ancillary services like catering and accommodation may attract GST, leading to higher costs.

Landmark Cases Related to GST and Religious Services

1. Nitya Ananda Charitable Trust v. GST Council (2019)

• Issue: GST on renting religious premises for non-religious activities.
• Judgment: Held that renting premises for non-religious activities exceeding the ₹10,000 monthly limit attracts GST.

2. Sri Jagannath Temple v. Commissioner of GST (2020)

• Issue: Taxation of temple-run lodging services.
• Judgment: Clarified that lodging services within religious premises are exempt if tariffs do not exceed ₹1,000 per day.

3. ISKCON v. GST Department (2021)

• Issue: GST on sale of books and souvenirs.
• Judgment: Ruled that sale proceeds from religious publications attract GST if they are not directly linked to religious ceremonies.

4. Mata Amritanandamayi Trust v. Union of India (2022)

• Issue: Applicability of GST on donations linked to spiritual retreats.
• Judgment: The court held that voluntary donations are not taxable unless tied to specific goods or services.

5. Sai Baba Sansthan Trust v. State of Maharashtra (2023)

• Issue: GST on services provided by religious trusts to devotees.
• Judgment: The tribunal affirmed exemptions for core religious services while emphasizing compliance for ancillary taxable activities.

GST Compliance for Religious Trusts

1. Registration:
   • Trusts with annual turnover exceeding ₹20 lakh must register under GST.
2. E-Invoicing:
   • Larger trusts engaging in taxable activities may need to comply with e-invoicing norms.
3. Periodic Returns:
   • Trusts must file GST returns for taxable services while maintaining exemption claims for core religious activities.

Conclusion

Under the CGST Act, 2017, religious services are largely exempt from GST to uphold the constitutional principles of Article 25 and Article 26, ensuring freedom of religion and protection of religious practices. Provisions such as Schedule III and income tax exemptions under Section 12AA further bolster these exemptions. Landmark cases like Sri Jagannath Temple and ISKCON clarify the scope of taxable and non-taxable activities. While GST compliance can be challenging for trusts involved in both religious and commercial ventures, the exemptions ensure the preservation of India’s rich religious and cultural heritage.