West Bengal Authority for Advance Ruling (AAR) in its recent ruling on the application filed by M/s Swayam has adjudged that a Charitable Trust is not liable to pay tax on legal, medical, psychological and financial support including training programmes and workshops to the women and their children surviving violence and abuse.
The reason for such ruling being absence of receipt of any consideration by the Trust and thus no supply takes place. Further in regard to legal services which is subject to payment under reverse charge the AAR has stated that the recipient of such services are the survivor woman and not the applicant and therefore reverse charge provisions will also not be applicable.
Facts of the Case
The applicant is a charitable trust registered under section 12A of the Income Tax Act, 1961 and is not registered under GST Law.
The applicant submits it facilitates access of the women survivors to legal aids. For example, it accompanies the survivor to the police and the courts and liaise with the lawyers when required. Depending upon the financial circumstances of the survivor, it often provides support in the form of reimbursement of the court fee, lawyers’ fee or medical expenses, including hospitalization or psychiatric counselling. Such financial support is also extended to paying the remuneration of the trainers and charges of the facilitators for trainings and workshops.
The applicant further submits that it does not charge anything on the survivors for the services it extends. The payments discussed above are meted out from donations received and interest on deposits.
Question on which Ruling was sought
Whether the applicant is liable to pay tax on the legal, medical, psychological and financial support including training programmes and workshops to the women and their children surviving violence and abuse.
Highlights and Ruling of order passed by West Bengal AAR
- The applicant is apparently assisting the women survivors in various ways to get back on their feet. Such survivors of sexual and other violence need services like legal aid, medical assistance, and vocational training. The recipient of such services is, therefore, not the applicant but the survivor woman. The applicant makes payments not to the supplier of the services, but as financial support in the form of reimbursement to the recipient survivor. It is, therefore, not liable to pay GST based on reverse charge mechanism on such payments.
- The applicant does not charge any consideration for facilitating the legal aid and other assistance. Such activities of the applicant, therefore, does not result in ‘supply’ of service as defined under section 7 (1) of the GST Act. The applicant is not, therefore, liable to pay tax thereon.
In light of above the AAR adjudged that the applicant’s activities do not amount to ‘supply’ of service, neither is it a recipient of the services for which it often provides financial assistance to the women survivors of sexual and other violence. The applicant is, therefore, not liable to pay GST on the activities described in the application.
For ready reference of our readers the order of West Bengal AAR is given below:
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