“Just because a trust is registered under Section 12AB does not mean all services received by it are exempt from GST.”
A common misunderstanding under GST is that charitable trusts enjoy blanket exemption on all services. However, GST exemptions are specific and limited.
Client Query
A charitable trust registered under Section 12AB of the Income Tax Act (not registered under GST) received security services from a security agency.
The key questions raised were:
Is GST applicable on security services provided to the trust?
Does Reverse Charge Mechanism (RCM) apply in this case?
Does 12AB registration automatically grant GST exemption?
GST Law Position
Under GST, exemption for charitable trusts is restricted only to specified charitable activities as defined under Notification No. 12/2017-CT(R). It does not apply to all inward supplies received by the trust.
Security services are taxable services under GST.
As per Notification No. 13/2017-CT(R), RCM on security services applies only when:
The supplier is a registered person, and
The recipient is also a registered person under GST
Key Observation
In this case, since the charitable trust is not registered under GST, RCM provisions may not apply.
Therefore, GST liability generally remains with the service provider under the forward charge mechanism, subject to applicable GST provisions and registration threshold.
Conclusion
A charitable trust registered under Section 12AB is not automatically exempt from GST on all services. Each transaction must be examined separately under GST law.
In cases where the recipient is not registered under GST, RCM may not apply, but the service itself may still remain taxable in the hands of the service provider.
Proper analysis of registration status and nature of service is essential before concluding GST liability.