This document provides answers to frequently asked questions (FAQs) about how goods and services tax (GST) applies to non-profit organizations (NPOs) in India. It discusses the scope of exemptions for various types of NPOs including charitable, religious, educational, and healthcare organizations. While NPOs are not completely exempt from GST, there are specific exemptions for certain services they provide such as healthcare, education, religious ceremonies, and goods used for worship. However, not all activities of NPOs qualify for exemptions and GST would apply in such cases. The document provides guidance on properly interpreting and applying the exemptions to various common transactions undertaken by NPOs.

1. FAQs for NPOs
Please use, copy, distribute, adapt, reproduce, remix and share – for free!
There are various non-profit organizations and GST does not exclude them from its grasp. It’s
important to identify transactions that are exempt and comply fully with GST on all others.
Here’s an attempt at providing answers to some frequently asked questions to help NPOs
navigate the GST landscape.
Contents
Part A: Introduction ...........................................................................................................................1
Part B: Scope of Exemptions – Services...............................................................................................3
Part C: Scope of Exemptions – Goods..................................................................................................5
Part D – Charitable and Religious Institutions .....................................................................................7
Part E – Educational Institutions.......................................................................................................15
Part F – Health care..........................................................................................................................20
Part G – Reverse Charge...................................................................................................................24
Part H – Free Activities.....................................................................................................................26
Part A: Introduction
Q1. What are NPOs?
A1. NPOs are non-profit organizations that may be established in the form of a Company
(s.8), society, trust, association (registered or unregistered) or individual-managed
institutions. The ‘form’ of an organization does not ipso facto (meaning, by that fact
alone) become a non-profit organization.
Q2. If GST is a tax on ‘business activities’, why are we discussing GST for NPOs?
A2. GST law contains a very broad definition in s.2(17) of CGST Act that travels beyond the
common-sense understanding of ‘business’. Further, NPOs are not always funded by
donations. NPOs undertake activities ‘akin to business’ and merely apply the proceeds
for their stated – non-profit – objectives. And, ‘NPO’ is loosely used without indicating
whether the ‘source of funds’ is from voluntary-charitable contributions or whether the
‘use of funds’ is towards voluntary-charitable activities.
Q3. Isn’t GST excluded if services are provided by NPOs are ‘below market rates’?
A3. No, GST does not concern itself with whether the services provided are ‘at or below’
market rates. Exemption are specified and if services do not qualify for the exemption,
GST applies. And when GST applies, valuation ‘below market rates’ comes in for further
scrutiny.

2. Q4. Aren’t NPOs out of GST?
A4. No, there’s no such promise to NPOs in GST. NPOs do not ipso facto fall outside the
scope of ‘supply’ as there are transactions like import of services or those listed in sch II
that are liable to GST, whether or not, undertaken in the course of business.
Q5. So, are all NPOs affected by GST one way or other?
A5. Yes, and when it’s admitted that NPOs are not ‘immune’ from GST then the law will be
applied correctly and a reliable answer reached. And ‘if’ exempt, it’s important to know
‘how’ and ‘if not’, it’s important to know ‘what next’ regarding GST.
Q6. But, are there any other reasons why GST applies to NPOs?
A6. Yes, NPOs are N-P-O, based on ‘source of funds’ or ‘use of funds’. Income-tax has its
own definition of tax exempt – charitable or religious or other – activities. GST distances
itself from all ‘generic and titular’ classification of NPOs and focuses on ‘specific
exemptions’. Also, GST applies when purchases are made from suppliers who are
‘unregistered’ (more about this – reverse charge – later in Part G).
Q7. So, are educational and religious entities also exposed to GST?
A7. Yes, there are very specific activities undertaken by educational and religious entities
that are singled out and exempted. And all other activities that are incidentally
undertaken and fall outside the scope of these exemption entail GST implications.
Q8. Is healthcare exempt from GST?
A8. Yes, healthcare services are exempt even if undertaken purely as a ‘for profit’
undertaking except cosmetic and plastic surgery.
Q9. Isn’t there any NPO that is completely left out of GST?
A9. No, NPOs are not listed in sch III and hence there are no NPOs that are left out of GST
completely. Churches/Convents that make their own ‘holy wine’ but are required to be
licensed to ‘manufacture’ even though it’s ‘not for sale’ and used exclusively in ‘religious
ceremony’. So, being under regulatory oversight is not abnormal and NPOs should not
oppose registration and reporting obligations under GST (or any other law for that
matter). An entity may well come within the scope of GST law only to be granted some
‘activity specific’ exemption. But if there’s no exemption, then GST on such transactions
would apply along with an opportunity for its recoupment from end-users. Expecting
‘immunity’ from GST may only be due to an impoverished appreciation of this new tax.
Q10. Are ‘small’ NPOs exempt from GST?
A10. No, there is no such special category as ‘small’ NPO. The general exemption applies to
NPOs – aggregate value of all transactions exceeds Rs.20 lakhs – as applicable to other
commercial enterprises. Apart from this, there are transaction-specific exemptions that
needs to be carefully selected from the myriad of notifications.

3. Part B: Scope of Exemptions – Services
Q11. What are the exemptions under GST, that are available to NPOs?
A11. In GST, ‘supplies’ may be exempted or ‘suppliers’ may be exempted. Here’s a look at the
list of exemptions applicable to NPOs:
Sl.
No.*
Description
(not an exact reproduction; text of notification emphasized or paraphrased by us)
1 Services ‘by’ an entity registered under section 12AA of the Income-tax act, 1961
‘by way of’ charitable activities
Para 2(r) ‘charitable activities’ defined to include (i) public health (ii) advancement of religion-
spirituality-yoga (iii) advancement of educational programmes or (iv) skill development and
preservation of environment
14 Services ‘by’ a person by way of –
(a) conduct of ‘any’ religious ceremony
(b) renting of ‘precincts’ of a religious place ‘meant for’ general public use
Use of ‘premises’ does not apply:
(i) Renting rooms for ‘more than’ Rs.1,000 per day
(ii) Renting premises, halls or open area for ‘more than’ Rs.10,000 per day
(iii) Renting shops for ‘business’ for ‘more than’ Rs.10,000 per month
69 Services provided –
(a) ‘by’ an educational institution ‘to’ its students-faculty-staff
(b) ‘to’ an educational institution ‘by way of’:
(i) transportation
(ii) catering
(iii) security and housekeeping
(iv) admission-examination
from pre-school to 12th only
Para 2(y) ‘educational institution’ is defined to mean an institution providing services by way of (i)
pre-school upto 12th
grade (ii) education resulting in qualification recognized ‘by any law’ or (iii)
‘approved’ vocational training (as defined in para 2(h))
77 Services ‘by way of’ –
(a) health care services ‘by’ a clinical establishment, an authorized medical
practitioner or para-medics
(b) services provided by way of transportation of patient in an ambulance
Para 2(zg) ‘health care services’ is defined to mean any service by way of ‘diagnosis’, ‘treatment’,
or ‘care’ for illness, injury, deformity abnormality or pregnancy in any ‘recognized system of
medicines in India’ and includes services by way transportation or patient but excludes ‘hair
transplant’, ‘cosmetic or plastic’ surgery except to restore or reconstruct anomaly arising from
defects, deformity or injury)
48 Not discussed (services by veterinary clinic)
* all references are Integrated (Rate) notification(s)only, namely, 9/2017-Int(R) dated 28 June, 2017

4. Q12. Are there any allied exemptions that NPOs enjoy?
A12. Yes, there are exemptions available to various transactions that NPOs enjoy as much as
other commercial enterprises. And these are:
Notif* Description
(emphasis by us)
Special Notes
(derived from notification)
8/2017
Central
(Rate)
Intra-State ‘inward supplies’ from
unregistered suppliers of goods or
services or both
 Applicable only to ‘intra-State’ supplies
 Value limit to be monitored ‘per day’
 Exemption not to apply ‘up to’ limit
 Applies to goods ‘and’ services
9/2017 Services by Government where the
consideration does not exceed
Rs.5,000 per occasion
 Applicable to non-sovereign functions
 Excludes postal service, services in
relation to aircraft or vessel and services
of goods/passenger transport
9/2017 Discussed later
* unless stated otherwise, references are Integrated (Rate) notification(s) only
Q13. Are there any transactions that are exempt even without any exemption notification?
A13. Yes, ‘donations’ are not listed in any exemption notification yet is not liable to GST. But,
to be rightly called so, it must really be ‘voluntary contribution’ without ‘anything in
return’ to the donor. Donations or voluntary contributions are outside the scope of GST
as they cannot be regarded as ‘supply’ in order to attract tax under this law.
Q14. How can donation or voluntary contribution involve ‘something in return’?
A14. It’s possible because information about the motivations tend to blur characterization of
donations. And sometimes the ‘something in return’ may not flow back to the donor but
to someone else at the ‘behest’ of the donor. For example, donations-contributions with
a specific end-use or donations-contributions that are prescribed or specified by donee
and donations-contributions that secure any advantage ore privilege or benefit to the
donor or his nominee. So yes, it’s possible that there’s ‘something in return’ that
unseats the receipts from being donations or voluntary contributions and hence attract
tax on these receipts.
Q15. So, can donations or voluntary contributions be excluded from tax?
A15. Yes, but not without a careful consideration of ‘motive’ of the donation or voluntary
contribution because unless there is a specific exemption that you can locate in the law,
transactions by NPOs would be liable to GST.
Q16. What’s this about ‘invisible transactions’ in GST?
A16. It’s a reference to transactions that are not apparent which may also have GST
implications. For example, free transactions, allowances paid, set-off of two
transactions, exchanges, etc. (more about that – free activities – later in Part H). GST
applies on the ‘money value’ of the consideration involved in such transactions. GST law
does not use the term invisible transactions but applies to transactions which may be
invisible in the books of accounts but can be found to exist based on other indicators in
an institution.

5. Q17. How should exemptions from GST be availed or selected?
A17. The facts of the transaction and the transacting parties must be fully understood and
the scope and applicability of the exemption strictly interpreted before deciding
taxability of a transaction. If there is any ambiguity of the applicability of an exemption,
unlike earlier laws, tax can be demanded along with denial of input tax credit as
‘wrongly’ availed. GST cannot be paid out of ‘abundant caution’ because GST does not
give an option to avail exemptions if they are absolute. In such cases too, any tax
collected ‘as GST’ will be recovered in addition to wrongly availed input tax credit.
Part C: Scope of Exemptions – Goods
Q18. What are exemptions are available to NPOs?
A18. In GST, ‘supplies’ may be exempted or ‘suppliers’ may be exempted. Here’s a look at the
list of exemptions applicable to NPOs:
Notif* Sl.No. Description
(emphasis by us)
2/2017 119 Printed books, including Braille books
2/2017 120 Newspaper journals and periodicals, whether or not illustrated or
containing advertising material
2/2017 98 Prasadam
2/2017 148 Puja samagri
* unless stated otherwise, references are Integrated (Rate) notification(s) only
Q19. What is the scope of exemption in entry 98 – prasadam?
A19. The expression – prasadam – refers to articles supplied after oblation or worship.
There’s a reasonably good understanding of this expression which must be drawn upon
to determine whether an article is prasadam or not. And it is not limited to articles
offered after oblation or worship only in a temple, it applies to equivalent articles in all
places of worship.
Q20. Is the expression – prasadam – descriptive or exhaustive?
A20. The expression – prasadam – is descriptive, that is, ‘every article’ that is ‘after’ oblation
or worship is prasadam. The rest of entry 98 reads as “supplied by religious places like
temples, mosques, churches, gurudrawas, dargahs, etc.”.
Q21. Does ‘community meal’ come within the scope of this exemption?
A21. A community meal is not prasadam as it is a fellowship meal shared by devotees after
participating in a religious ceremony even if it has first been offered during the
ceremony. Often, prasadam is also served along with the meal, probably as the first
item served but that does not make the entire meal, prasadam. Prasadam is not offered
in meal-sized serving. Fellowship meal is not eligible for this exemption. The large
quantity served and extent of satisfaction it can provide is a contra-indicator to qualify
eligible for this exemption.

6. Q22. Should prasadam be consumed within the religious place or can it be carried away?
A22. There is no such ‘additional’ requirement in the exemption notification and whether
consumed within the religious place before-during-after the oblation or worship or
carried away for consumption later, does not alter the entitlement to this exemption.
Q23. Does prasadam refer to articles that can be ‘consumed’ like food or ‘perishable’ like
flowers or does it apply to ‘all’ articles of worship?
A23. No, prasadam appears to apply only to those that are consumable or perishable as there
is another entry – 148 puja samagri – that covers non-consumable and non-perishable
articles of oblation or worship.
Q24. Is the expression ‘puja samagri’ exhaustive or illustrative?
A24. The notification uses the expression ‘puja samagri, namely:’ and when ‘namely’ is used,
it becomes exhaustive and not illustrative. Further, it also does not use expressions like
‘and such other articles’ so as allow expansion of the list of articles. However, ‘puja
samagri’ itself is meaningful and applies to all ‘articles of oblation’ and the elucidation
ought not to diminish the scope and ‘namely’ be regarded merely as a guide the
‘general nature’ of the ‘samagri’.
Q25. What are items that are not listed in entry 148 but are still exempt?
A25. The expression – puja samagri – indicates articles supplied after oblation or worship.
Applying such a test, all articles supplied not for their intrinsic value but their affiliation,
proximity and association with a religious ceremonial use may bring this exemption to
all these articles. Existence of high intrinsic value dilutes the availability for this
exemption though not a universal disqualification.
Q26. Are these articles – puja samagri – exempt when supplied ‘to’ the institution or supplied
‘by’ the institution?
A26. An article is a puja samagri both, before and after, its use in a religious ceremony. So,
this exemption is available both when they are supplied by the manufacturer ‘to’ the
institution for use in a religious ceremony and when they are distributed ‘by’ the
institution to devotees. Prasadam is prasadam only ‘after’ use in a religious ceremony
but puja samagri is puja samagri ‘before’ and ‘after’ use in a religious ceremony. There is
no contra-indication in the expression ‘puja samagri’. But, a word of caution, this
exemption cannot be used in case of all articles.
Q27. What would be the implication if ‘general purpose’ articles are manufactured and used
as ‘puja samagri’ in religious ceremony?
A27. ‘General purpose’ articles would not be eligible to this exemption. Such general-purpose
articles will be taxable when supplied ‘by’ the supplier ‘to’ the institution. And after the
religious ceremony, when distributed ‘by’ the institution ‘to’ devotees, it would be
eligible to this exemption.

7. Q28. What if these articles are ‘otherwise exempt’ such as coconut, banana, candles, flowers,
water, glass bangles, sindhur, puffed rice, earthen pots, etc.?
A28. If the article is exempt even without being used as puja samagri, then it would continue
to enjoy the exemption without having to conform to the requirements of this
exemption – use in oblation – and no tax would be payable on the inward supply or the
outward supply.
Q29. Are replicas of ‘puja samagri’ be exempt from tax under this exemption?
A29. Yes, such articles (replicas) would be exempt if they come within the following three
categories:
a) Idols and other objects of worship even if possessing significant intrinsic value are
eligible to this exemption;
b) Photos and plaques that contain religious inscription meant to be put up for display
or proclamation are eligible to this exemption; and
c) Articles containing religious inscription without intrinsic value used in the practice of
religion also eligible to this exemption
Q30. Are all articles carrying ‘religious inscriptions’ eligible for this exemption?
A30. No, articles that are meant principally for general purpose or alternative use but
carrying religious inscription are not eligible for this exemption. For example, saree,
shawls, etc. with religious inscription. But, scale-models of these articles that are
incapable of general purpose or alternative use will be exempt.
Q31. Are articles used in religious ceremonies like bangles, bracelet, saree and dhoti (unique
colour or make), saree/dress for idol, jewellery for idol, mats-floor coverings, display
articles of different materials, works of art, etc. eligible for this exemption?
A31. No, all though these articles are meant for use in religious ceremonies and empirically
not used for general purposes, they would not be eligible for this exemption as puja
samagri. In case they are otherwise exempt (see Q28), they can be exempt but not
under this exemption as puja samagri.
Part D – Charitable and Religious Institutions
Q32. What is charitable activity?
A32. Charitable activity is defined in para 2(r) to include the following:
a) Public health
b) Advancement of religion, spirituality or yoga
c) Advancement of educational programmes
d) Skill development and preservation of environment
Q33. Can the time-tested definition of ‘charitable activity’ from Income-tax Act be applied in
relation to GST?
A33. No, GST law provides a specific definition that must be applied.

8. Q34. How should each ‘domain’ described in the definition be understood?
A34. Consider the ‘pith and substance’ of any activity and examine if it answers the ‘domain’
described in the definition – public health, advancement of religion, advancement of
education and skill development. In other words, whether the activity (of an NPO)
directly and most proximately accomplish or fulfill the purpose of each ‘domain’.
Q35. Which limb of the transaction of ‘charitable activity’ does this exemption apply to?
A35. This entry applies in respect of ‘outward supply’ by the entity and not ‘inward supply’.
This is very important to note that an activity can be regarded as ‘charitable activity’
only when it is delivered to the beneficiary. Inward supplies are not exempt under this
notification (sl.no.1 of 9/2017-Int) because it would already be exempt as outward
supply in the hands of the entity (see Q36) being the supplier who is providing the
‘charitable activity’.
Q36. Who qualifies for exemption towards ‘charitable activity’ in sl.no.1 (9/2017-Int)?
A36. The entity that meets the ‘qualifications’ will enjoy this exemption. The form of entity is
not specified but the requirement is to have secured a valid registration under section
12AA or 10(23C)(v) or 10(23BBA) of the Income-tax Act. This registration must be
effective, applicable and available on the date of supply when this exemption is sought
to be availed.
Q37. Any key aspects about – public health, advancement of education and skill development
– which is listed in para 2(r) as ‘charitable activity’?
A37. These three activities are extremely specific in the definition of ‘charitable activity’ and
does not need any further elucidation.
Q38. What is ‘advancement of religion’ in the definition of charitable activity?
A38. It is a super-set of various activities that are admitted by those involved in the practice
of the religion as being capable of practice, maintenance and propagation of that
religion. It may include the following:
a) Organizing religious meetings and ceremonies
b) Establishing places of worship
c) Dissemination of information, knowledge and training
d) Administration of the above
e) Activities incidental to the above
Q39. Does ‘advancement of religion’ refer to the ‘inward supply’ or the ‘outward supply’?
A39. It refers to ‘outward supply’ and is to be examined based on its conformity with the
super-set of activities – advancement of religion.
Q40. Why is ‘inward supply’ not includible in the exemption?
A40. Inward supplies are treated based on their own merit, that is, if the activities are very
proximate to practice of religious, it would be exempt in the hands of the supplier such
as manufacture of puja samagri (discussed earlier) or conducting a religious ceremony

9. also exempt (under a later entry – 14 – in the same notification). And those that are
distant and generic supplies, they ought not to be exempted merely because the
recipient is using it for advancement of religion remains taxable such as services of a
contractor constructing a building approved to be a place of worship.
Q41. What is the scope of the expression ‘advancement of religion’?
A41. ‘Advancement of religion’ is a broad test but not an infinite one. Reasonable
interpretation of the supply involved would help. Opinion of persons involved in the
given faith is to be preferred over those of persons unconnected with the faith.
Q42. Is religious education ‘religious activity’ or ‘charitable activity’?
A42. Since, religious education does not result in ‘qualification recognized by any law’, it is
unlikely to qualify as religious activity. But, it appears to be ‘advancement of religion’
which is listed in para 2(r)(ii) as ‘charitable activity’.
Q43. Is religious education taxable in GST?
A43. No, religious education is also a manner of ‘advancement of religion’ and as such it
would not be taxable. Fee for the religious studies may be paid by the pupil himself or
by devotees (read, administration trust/board or members of congregation) who
sponsor the pupil’s religious learning.
Q44. Are there any conditions to satisfy while availing exemption for religious education as
charitable activity?
A44. Yes, the only link is that the religious education must demonstrate is its proximity with
‘advancement of religion’ to qualify for this exemption. Persons who have taken a vow
of life-long religious service and therefore enter religious education as well as persons
who only desire to avail structured form of education in the religious doctrines would
both qualify for this exemption. Religion does not fail to get advanced if lay-persons
avail the religious education.
Q45. Are the services of a ‘religious instructor’ in imparting ‘religious education’ exempt?
A45. Yes, this is also a service in ‘advancement of religion’. Please note that ‘outward supply’
is exempt under this exemption (see Q39). And in the present case, the outward supply
is the service of the religious instructor.
Q46. If these ‘instructions’ are provided by a lay-person (one who is not wholly dedicated to
religious service himself), would this also qualify for the exemption?
A46. Yes, the outward supply by this lay-person does not cease to be ‘advancement of
religion’ when he imparts religious instructions to the pupil. There appears to be no
‘pre-qualifications’ for the outward supply to be exempt.
Q47. What does the exemption in sl.no.14(a) – charges for performance of religious ceremony
– apply to?
A47. ‘Charges’ imposed and recovered for conducting a ‘religious ceremony’ are exempted. It
is the ‘outward supply’ that is exempt when there’s a quid pro quo directly in relation to

10. the performance of a religious ceremony. Please note, if cost of performing religious
ceremonies are met out of funds tendered by devotees, it would be donation or
voluntary contribution and not charges for conducting a religious ceremony.
Q48. What is ‘religious ceremony’?
A48. It a non-specific activity and depends of the religious teaching of the concerned religion.
It can be explained as the activity or procedure visibly performed that bears proximity
with any teaching or tradition that is undertaken that manifests practice of that religion.
Q49. What are excluded from ‘religious ceremony’?
A49. Undertaking general administrative activities in relation to the religious establishment is
not itself religious ceremony. Passive maintenance of the religious establishment or
extra-ceremonial activities carried out in-premises where religious ceremonies are
performed also do not satisfy the visibly restrictive expression ‘religious ceremony’.
There is no room to include incidental activities and support activities in this exemption.
Q50. When it is a ‘religious ceremony’, isn’t the payment made a voluntary contribution
called dakshina or offering or kanike?
A50. When ‘charges’ are prescribed, imposed and recovered directly in relation to the
performance of any ‘religious ceremony’ then such receipts cannot be held to be
‘voluntary contributions’. Voluntary contributions are ‘in exchange for nothing’. Hence,
the charges ‘in return for something’ need this exemption and are not voluntary
contributions.
Q51. Is there any other exemption for ‘voluntary contributions’?
A51. No, there is no other exemption but when contributions are voluntarily made, there is
no supply and hence do not require an exemption to be free from GST.
Q52. How are receipts established to be ‘voluntary contributions’?
A52. Voluntary contributions display certain characteristics, such as:
a) Non-recurring in its frequency or regularity;
b) Not specified or prescribed by the done;
c) Deviation (from making such contribution regularly) is not frowned upon by done;
d) Quantum of such contribution is indeterminate;
e) Often anonymous or donor unknown/undisclosed/confidential; and
f) No privilege, benefit or advantage enjoyed in return for making the contribution
Q53. Is ‘renting’ liable to GST?
A53. Yes, renting of immovable property is a taxable activity in GST. This activity is listed in
sch II of the CGST Act. All transactions listed in sch II are liable to GST whether or not
undertaken in ‘furtherance of business’.
Q54. Is ‘renting’ by ‘religious institutions’ also liable to GST?
A54. Yes, renting is a taxable ‘outward supply’ whether or not undertaken in ‘furtherance of
business’. There is an exemption to ‘renting of residential dwelling for use as residence’

11. (in sl.no.13 of 9/2017-Int). Please note that exemptions may apply either to the ‘supply’
or to a specific ‘supplier’ or to a specific ‘end use’.
Q55. What is the scope of exemption in sl.no.14(b) – renting of precincts of a religious place
meant for general-public?
A55. Renting is exempt when the precincts of a religious place are let-out. Please note that
‘all’ properties owned by a religious institution (more on that later) are not exempt but
only when its ‘precincts’ are let-out. A careful understanding of ‘precincts’ is required to
ensure that this exemption is not misapplied.
Q56. What is a ‘religious place’?
A56. It is a place that is organized to accommodate the carrying out ‘acts of worship’ as
understood in each faith. A ‘building’ is not a religious place to begin with but wherever
worship usually takes place, that ‘makes’ the building a religious place. Therefore,
religious place is not confined to a specific building but can be include any premises or
open spaces designated to accommodate worship.
Q57. What is a religious place that is ‘meant for’ general-public?
A57. The said premises or location must be available for use by an ‘uncertain’ population of
devotees or congregation. As such, if the premises or location is ‘reserved’ for certain
persons, it would not meet the requirements of the definition merely because it is open
to a very large group of persons. For example, a prayer hall located within a school
compound that is out-of-bounds for anyone other than students, staff and guardians.
But, even if the population is very limited, it meets the requirements of the definition is
that population is uncertain and indeterminate.
Q58. What about other places-of-worship accessed by devotees?
A58. The premises must be principally designed, operated and maintained as a ‘place of
worship’. For example, a prayer room in an airport or mall, though meant for an
uncertain population of visitors, the room merely provides privacy to devotees but
meant to be used for another principal purpose. As such it would not be place of
worship.
Q59. What are ‘precincts’?
A59. Precincts refers to an area or space that is not demarcated as a separate identifiable
property as per revenue records. Precincts must be spaces that are indeterminably
contiguous with the religious place. Merely being adjacent to the religious place would
not suffice if they are demarcated in the revenue records as an independent property
though owned by the same religious establishment/entity. Proximity must flow not from
being located side-by-side but by being inextricably contiguous and inseparably unified
with the religious place (and one that is open to general-public).
Q60. Does this exemption apply to ‘any’ property within the vicinity of the religious place?

12. A60. No, the exemption is very specific and must be carefully applied to avoid misapplication.
Location of the property within the ‘vicinity’ of the religious place is not sufficient. The
property and the religious place must be a ‘single contiguous property’. Demarcation in
the revenue records with distinct ‘property identification number’ is a contra-indicator.
Q61. What is the ‘first step’ in examining whether this exemption is applicable or not?
A61. Step 1 – find a ‘religious place’ that is ‘open’ to general-public and then see if the entity
that has established the religious place is organized as specified (see Q36). Religious
place must be in use as a religious place and not ‘used’ for religious worship during
special occasions. For example, during festivals, public play grounds are permitted to be
used to offer community prayers and such use does not render it to be a religious place.
Q62. What is the ‘next step’ in applying this exemption?
A62. Step 2 – selection of the right ‘kind’ of property to which this exemption applies. Here
are the parts to this step:
a) Step 2(a) – locate ‘rooms’ within this religious place that is let-out on ‘daily charge
basis’ that is less than Rs.1,000 per day. Rooms should not provide extensive
facilities such that it ceases to remain a ‘room’ and become a well-defined
‘residential dwelling’. Also, ‘rooms’ can be single or shared occupancy including
dormitory-style accommodation.
b) Step 2(b) – locate ‘premises’, ‘community halls’, ‘kalyanamandapam’ or ‘open areas’
within this religious place that is let-out on ‘daily charge basis’ that is less than
Rs.10,000 per day. The listing of properties to be covered by this provision is not
exhaustive but illustrative (see use of ‘comma’ before ‘and’ – it’s an Oxford Comma).
So, the test of ‘precincts’ (see Q59 and Q60) continues.
c) Step 2(c) – locate ‘shops’ or ‘other spaces’ within the religious place that is let-out
on ‘monthly charge basis’ that is less than Rs.10,000 per month. The words used are
“renting ‘of’ shops” and not “renting ‘as’ shops”. Such usage appears to allow
disjointed properties also to avail this exemption (provided, of course, the rent must
be below the specified amount). But, if it’s recognized that all these three clauses in
the proviso are exceptions to the main clause – (b) renting of precincts of a religious
place – does not permit extending this exemption to disjointed properties. Further,
the words “…or open spaces…” does not augur well with extension of the exemption
to disjointed properties. So, the test of ‘precincts’ (see Q59 and Q60) continues.
Q63. Once the ‘right kind’ of property is identified, can the exemption be straight away
applied?
A63. Step 3 – identify whether the ‘term’ of the rental arrangement is ‘per day’ or ‘per
month’ as prescribed. Calculating ‘equivalent’ of the specified rent charged is not
permitted.

13. Q64. When the proviso clearly states that halls and shops are exempt subject to the amount
of rent charged, how can such clearly worded language be given restricted
interpretation?
A64. Exemption notifications must be strictly interpreted and there is no room to be
generous in extending the exemption. Proviso creates an exception to that which comes
within the scope of the primary provision. Expressions used such as rooms, premises,
halls, open area and shops refer to the nature of the structure or the purpose of the
structure. These expressions cannot be relied upon to define the scope of the
exemption and would only be the exception carved out but not before they have come
within the scope of this exemption. To interpret generously can result in extending the
exemption based on the nature of the structure or the purpose of the structure without
adhering to the boundaries laid down by the primary provision – precincts of a religious
place meant for general-public.
Q65. What about rent of ‘stand-alone’ properties owned by an entity listed in the exemption?
A65. Exemption is not applicable if the property is ‘not’ within the ‘precincts’ of the religious
place even if the rent charged is well below the specified amount(s). It is very important
to apply this exemption cautiously. If one were to pick out words like ‘halls’, or ‘shops’
from the proviso in the exemption and extrapolate their common-sense understanding
to the whole of the exemption, it would result in ‘expansion’ of the exemption and not
an ‘application’ of the exemption. Had that been the intention, suitable provision ought
to have been made in the exemption itself by leaving out such ‘qualifying’ words.
Q66. Could this be a ‘conservative’ interpretation of the exemption?
A66. Perhaps yes, but exemption notifications are not permitted to be liberally construed. As
a result, GST compliances may be attracted which may not be required if a liberal
interpretation is eventually allowed by Courts. But consider the plight of a religious
institution that lets the opportunity to recoup the tax from the occupant go-by and is
saddled with a demand after few years by ignoring this ‘conservative’ interpretation. So
long as the ‘conservative’ interpretation is plausible and founded on the express words
of the exemption and not ‘motivated’ by a GST-averse reading, this exemption must
continue to receive careful interpretation.
Q67. What if ‘other’ religious institutions avail this exemption?
A67. It is for each institution to interpret the exemption and defend its application, if
challenged. Institutions are welcome to approach the ‘authority for advance ruling’ to
get a binding ruling to be sure of the interpretation.
Q68. In case is it held to be ‘not taxable’, what is the consequence?
A68. Tax collected from occupants having already been deposited with the Government,
nothing further remains payable. But, input tax credit, if any, availed will be repayable
with interest at 24 per cent per annum. However, considering that input tax credit in

14. respect of renting of property being ‘nil-to-low’, this liability would not be material at
least not in comparison to the alternative of a tax demand being made.
Q69. Isn’t reference to – amount of rent charged – a sufficient and all-encompassing test to
allow the exemption to ‘all’ properties located in ‘near proximity’ to a religious place?
A69. No, being in ‘near proximity’ to a religious place is not sufficient but a degree of
proximity that is so inextricably contiguous and inseparably unified with the religious
place such that it cannot have an identity of its own apart from being recognizable as
falling within the precincts (of the religious place) is necessary to avail this exemption.
And such property must be let-out as rooms for accommodation, halls/open spaces to
conduct functions and shops/other spaces to undertake commerce. Such end-use avails
the exemption based on the amount of rent charged. Language of the proviso, however
adventurously interpreted, cannot exempt properties which were never meant to be
exempted.
Q70. Would rooms let-out at different ‘unit of rental’ – per month instead of per day and vice
versa – also be eligible for this exemption?
A70. No, exemption allowed based on the amount of rent charged also indicates that the
threshold of charges should not be ‘reworked’ to fall within the specified amount. That
is, a monthly rental contract should not be reworked to a per day rate to forcibly claim
exemption. To be exempt, the arrangement must also be on similar terms such as ‘per
day’ or ‘per month’ as applicable to each of the cases listed in the proviso because the
language does not permit such re-fitment which would have easily been possible if ‘or
equivalent thereof’ was appended.
Q71. Is it possible that renting – below this threshold limit of rent charged – be taxed?
A71. Yes, properties that are not within the precincts of the religious place are completely
out of this exemption even if they are below the threshold limit of rent charged.
Q72. Are there any other ‘renting’ arrangements that are taxable?
A72. Yes, religious institutions permit installation of hoardings and signboards including
peripheral wall area of the building, which are then let-out for a fixed rental for display
of advertisements. These arrangements, though located well within the precincts, will
not enjoy the exemption.
Q73. Would ‘part-time’ rental arrangements be taxable?
A73. No, open spaces if they are within the precincts of the religious place and let-out for use
as ‘visitors parking’ by a restaurant or cinema near-by after normal worship days / hours
would be eligible for this exemption. The test continues to remain – precincts and
specified amount – to enjoy the exemption.
Q74. Is there any other activity that would be exempt?
A74. No, unless exempted specifically, as discussed above, all other income-generating
activities would be taxable even if undertaken by a religious institution. For example,

15. cleaning charges collected from users of the precincts, commission from caterer or
audio-video equipment rental suppliers, etc. would be taxable.
Q75. Are two simultaneous transactions involving two charitable institutions exempt?
A75. No such general rule can be derived. Each transaction must be individually examined for
applicability of the specific exemption. Please also consider the permissibility of such
transactions under Income-tax Act.
Q76. Are foreign contributions’ exempt from tax?
A76. There is no special exemption to foreign contributions unless otherwise covered by
exemptions allowed.
Part E – Educational Institutions
Q77. What is the scope of exemption in sl.no.69(a) – services provided by an educational
institution?
A77. Here, ‘service provider’ is exempt without any reference to any specific ‘output services’
of such service provider. Hence, ‘all’ services by the service provider is exempt but only
if the beneficiaries are ‘students-faculty-staff’.
Q78. If the beneficiaries are not ‘exclusively’ students-faculty-staff, would this exemption be
partially available?
A78. No, if the services are provided to ‘both’ students-faculty-staff as well as to outsiders it
would fall outside the exemption. The relationship of ‘education institution and
students-faculty-staff’ is imperative and will not be satisfied if outsides are also allowed
to avail these services (more questions answered below). Exemption cannot be availed
to the ‘extent’ provided to students-faculty-staff will not be available as the exemption
is to ‘service provider’ and not the ‘service’. Exemption applies when provided ‘to’ and
not ‘to the extent’ provided to students-faculty-staff.
Q79. Will the ‘relationship’ of – institution and student-faculty-staff – be altered if outsiders
are also permitted to avail the services of the institution?
A79. The pre-qualification to avail this exemption is the existence of the ‘relationship’
between them. There is no reference of any specific service that is exempted because all
services are exempted once the provider-receiver are correctly identified. Hence,
existence of a ‘qualifying’ relationship is imperative.
Q80. What are the tests of this ‘qualifying’ relationship?
A80. It is left to a reasonable interpretation of the words ‘student’, ‘faculty’ and ‘staff’ to
come to the correct answer and following may be one possible explanation:
a) Student is one who has been granted admission to a program that the institution is
permitted to offer and which itself defines the institution under para 2(y) and in the
present context avail the services from the institution;

16. b) Faculty is one who is engaged by the institution – employment or other form of
contract – to exercise their knowledge, training and experience in the fulfillment by
the institution of its obligations towards the student and in the present context avail
certain services from the institution; and
c) Staff are ones who are necessary employees of the institution who perform any
assigned tasks and in the present context avail certain services from the institution
Q81. Once ‘outsiders’ are permitted to avail the services of the institution, wouldn’t these
outsiders become ‘students’ themselves?
A81. No, there may be various services provided by the institution to ‘outsiders’ without the
relationship being in existence. For example, registration fee to students of other
institutions participating in an inter-collegiate competition, etc. These services are
provided to persons who are students but of some other institution. Exemption applies
to ‘its’ students-faculty-staff.
Q82. But, if ‘outsiders’ also satisfy the test of ‘student-faculty-staff’, would the services
provided by the institution to them now be exempt?
A82. Yes, please consider the explanation offered in Q80 as to their definition.
Q83. Does this exemption apply only to education provided by the educational institution?
A83. No, the exemption being allowed to ‘service provider’, so ‘all’ services of this service
provider are exempt but only if provided to the specified beneficiaries. That is, services
that may otherwise be taxable such as renting of property (hostel), supply of food
(canteen), etc., will also avail this exemption. However, sale of note books will not be
exempt because this exemption applies only if the supply is a ‘service’ and not ‘goods’.
Q84. What ‘qualifications’ are covered by ‘education’?
A84. Qualifications ‘recognized’ by any law is covered by this exemption and it need not be
limited to UGC recognition but the recognition must be such that it has the ‘force of law’
such as customary laws recognized in India.
Q85. How exactly do ‘private coaching centers’ fall outside this exemption?
A85. Private coaching centers provide the same ‘kind’ of education but are incapable of
conferring ‘qualification’ recognized by law. Kindergartens who are not ‘duly registered’
with the State Education department would fail to qualify for this exemption. Similarly,
vocational training centers that do not offer a program that is ‘approved’ would fail to
qualify.
Q86. What about ‘extra classes’ provided by the educational institution to prepare for
competitive exams to be taken up after completion of the current program?
A86. If the ‘services’ are provided exclusively to ‘students’ who are enrolled for the principal
program, ‘any’ service provided by the educational institution would be exempt.
Q87. Will the exemption be available if these extra classes are conducted after normal
working hours or during vacation?

17. A87. Yes, the exemption will be available if these extra classes are conducted for students
who are enrolled for the principal program offered by the institution.
Q88. Will the exemption be available to ‘outside students’ who join only for these extra
classes?
A88. When outside students are permitted to join these extra classes, it indicates that being a
student of the institution is not a precondition to enroll for these extra classes. These
extra classes become an independent program which merely prepares students for the
competitive exams in respect of which these classes are organized and therefore does
not result in satisfying the condition of – qualification recognized by any law – arising
directly out of these extra classes.
Q89. What about services ‘provided’ to any other persons?
A89. Unless exempted, services to any other persons, even though provided by the
educational institution, falls outside the scope of this exemption though having some
distant nexus with the running of the educational institution and that the proceeds are
directly used in the maintenance of the institution. For example, programs for faculty of
other institutions, renting of facilities of the institution to conduct events by other
establishments, charges collected from operator of canteen for students, vehicle
parking management fee is collected, charges for swimming pool usage during vacation,
etc.
Q90. What is the scope of exemption in sl.no.69(b) – services provided to an educational
institution?
A90. Services provided ‘to’ an educational institution are limited to:
a) Transport of students-faculty-staff;
b) Catering;
c) Security, cleaning or house-keeping; and
d) Admission or examination services
Q91. Are there any ‘additional conditions’ to avail exemption of ‘inward supplies’?
A91. Yes, this exemption of ‘inward supplies’ is only available to an institution providing pre-
school upto higher secondary education.
Q92. Is this exemption to inward supplies available to an ‘integrated institution’?
A92. No, this exemption will not be available if the institution offers integrated education
beyond higher secondary education. This exemption cannot be partially availed even if
records can be separately maintained. The proviso uses language that makes any further
education offered by the institution to be a ‘disqualification’ from this exemption.
Q93. Is ‘renting of building’ to an educational institution exempt?
A93. No, supplies ‘to’ an educational institution that are exempt does not include ‘renting’.
As such, land, building and other infrastructure given on rent to an educational
institution is taxable.

18. Q94. Is this exemption applicable to the service provided by ‘lecturers’ to students?
A94. No, this exemption is not applicable as the services of a lecturer are provided ‘to’ the
educational institution and not ‘to the student. But, services of a lecturer are excluded
from GST in sch III – services of employee to employer.
Q95. What about services of a ‘part-time’ lecturer availed by an educational institution?
A95. No, this exemption will not apply when specific ‘service provider’ is exempt and not the
‘service’. When the service provider is any other person, this exemption will not apply.
Services of a ‘part-time’ faculty is not exempted even though it is integrally linked to the
outward supply by the institution. As part-time lecturer is also not an employee, the
institution would be liable to discharge this tax (more about this – reverse charge – later
in Part G).
Q96. Will supply be exempted if the ‘specified services’ are provided to other customers?
A96. Yes, to the ‘extent’ the inward supplies are provided ‘to’ a recipient who qualifies as an
educational institution, it will be exempt. There is no restriction if the same supplier
were to offer these services to persons who are not eligible for this exemption.
Q97. What are key aspects relating to ‘transport’ service received by educational institution?
A97. The key aspects to consider are:
a) The services received here – transportation – is not about the classification of the
service but the nature of the service. In other words, the contractual arrangement
may vary from case to case but the result of the arrangement must be for services of
transportation to be eligible for this exemption;
b) Transportation is exempt only when it is provided to students-faculty-staff and the
charges for such transportation are billed to the educational institution;
c) This exemption applies to ‘services supplied’ when provided to ‘specified recipient’;
d) These services when provided by the same service provider to any other person
would not come within the scope of this exemption;
e) This exemption is available to the service provider only when the recipient is an
educational institution as defined under this notification and not otherwise; and
f) If the charges for the transportation services are collected directly from students-
faculty-staff by the service provider, then the services would not come within the
scope of this exemption even though the arrangement may be facilitated by the
educational institution.
Q98. What are key aspects relating to ‘catering’ service received by educational institution?
A98. The key aspects to consider are:
a) All the points mentioned in relation to transport service apply in relation to catering
service; and
b) Supply of food to students against direct payment in a canteen run on-campus is
outside the scope of this exemption

19. Q99. What are key aspects relating to ‘security and housekeeping’ service received by
educational institution?
A99. The key aspects to consider are:
a) All the points mentioned in relation to transport service apply in relation to security
and housekeeping service; and
b) These services may be contacted in two ways – as security and housekeeping
services or as a manpower supply services in relation to security and housekeeping
activity – but exemption would apply to any forms of contracting.
Q100. What are key aspects relating to ‘admission’ service received by educational institution?
A100. The key aspects to consider are:
a) All points mention in relation to other services is applicable to the service provider;
b) The exact nature of the service is not specified here but use of the words ‘relating
to’ in the context of admission services covers a wide spectrum of services that are
akin to services of an intermediary or agent;
c) Services relating to ‘admission’ include proliferation of information about the
programs offered by the educational institution, creating-maintaining-updating
information necessary for deciding about securing admission among various
student-groups/parent-groups, facilitating travel arrangements to attend admission
process, relocation assistance services and other related services, within the sweep
of this service;
d) Services performed after admission are excluded; and
e) Services to be exempt must be ‘billed to’ and ‘paid for’ by the educational institution
to the service provider.
Q101. What are key aspects relating to ‘examination’ service received by educational
institution?
A101. Key aspects to consider are:
a) Though this a part of the clause relating to admission service, this service is entirely
different;
b) Services must be directly relating to ‘conduct’ of examination;
c) Conduct of examination includes setting the question paper, planning-organizing-
conducting examination (written, practical or verbal), evaluation/re-evaluation of
answer scripts, finalization of examination results and associated services which are
necessary for successful conduct of examination by the educational institution; and
d) This service excludes the designing course curriculum and declaration of the results
as these are the activities of the educational institution.
Q102. Are services of ‘admission-examination’ applicable to degree and vocational courses?
A102. No, services described in Q100 and Q101 are applicable only to the level of Grade-12
received by the educational institution.

20. Q103. Are ‘free of cost’ services provided to an educational institution exempt from tax?
A103. No, when it is recognized and admitted that services are provided, it is implied that
there is a valid contract. A valid contract is one that has a valid consideration. In a valid
contract, it is impossible for consideration to be absent. ‘Free of cost’ is a misnomer and
what is really meant is that the consideration is in non-monetary terms. When services
are provided for non-monetary consideration, tax is applicable on the services based on
the ‘open market value’ of such services (rule 27). Other than the exemptions noted
above, all services received by an educational institution are not free from tax.
Q104. Does that mean that all ‘free’ services provided to an educational institution are
taxable?
A104. No, voluntary contributions are always exempt. For this reason, it is important to
correctly classify whether it’s a supply that is mistakenly taken to be free or is there a
voluntary contribution that is mistakenly taken to be a supply. The former alone is
taxable but the latter is not taxable as it is not a supply at all.
Q105. What about transactions between associated entities like an education society and a
trust – both being under the same administration/management?
A105. Once it is established that there is a contract for supply of services, tax will be exempt
only if it comes within the scope of this exemption notification. If not, tax will be
applicable at the open market value of those services. In a transaction between a
society and trust involved in education activities, it is very common to find that these
transactions are entered at a nominal consideration which is far below open market
value. Such transactions inevitably come under review by the tax administration.
Q106. Is stipend paid to PG-Doctoral students taxable?
A106. No, students during their PG-Doctoral dissertation period are exempt but not under this
entry. Amount paid may take either of the following forms:
a) payment may merely be to defray incidental expenses – it is not consideration;
b) they are not (yet) qualified to be a supplier – it is not supply; or
c) due to employer-employee relationship – it is excluded from GST under sch III.
Part F – Health care
Q107. Are ‘healthcare’ services defined?
A107. Yes, ‘healthcare services’ are defined in para 2(zg) to mean any service by way of
‘diagnosis’, ‘treatment’, or ‘care’ for illness, injury, deformity abnormality or pregnancy
in any ‘recognized system of medicines in India’ and includes services by way
transportation or patient but excludes ‘hair transplant’, ‘cosmetic or plastic’ surgery
except to restore or reconstruct anomaly arising from defects, deformity or injury.

21. Q108. Are healthcare centers required to be NPOs to avail this exemption?
A108. No, not-for-profit as well as for-profit establishments can equally avail this exemption.
Q109. What is the scope of this exemption?
A109. Here, ‘output supply’ is exempt with qualifications of the ‘service providers’ being
specified. It is well known that legal entities – providing healthcare services – cannot
acquire the qualifications necessary to provide these services but the exemption would
be available to these legal entities by engaging (though not necessarily only by way of
employment) natural persons with the said qualifications.
Q110. What is the reference to ‘clinical establishment’ in this exemption?
A110. Reference to ‘clinical establishment’ indicates that in the case of legal entities,
exemption is available only if they are duly registered under The Clinical Establishments’
(Registration and Regulation) Act, 2010. Recourse to this Act is necessary to
differentiate ‘healthcare infrastructure rental facility’ that also exist where
infrastructure is let-out to health care professionals.
Q111. What is the purpose of Clinical Establishments’ Act?
A111. This Act does not cast onerous requirements except that a Registered Medical Officer be
accountable for services provided in such establishment along with certain service
quality standards lending itself to regulatory oversight on matters of health care laws
and standards – approved methods of treatment, use and disposal of bio-medical and
hazardous materials and maintenance of records for verification and implementation of
other laws.
Q112. Having read the definition of ‘healthcare service’, is there any additional guidance that
can be considered while applying the definition to the various activities?
A112. Reference in this exemption is to the ‘output supply’, as such, ‘any’ supply that is
‘inextricably’ linked to the said output supply would enjoy exemption. For example,
supply of medicaments by administering to patient during treatment / procedure,
supply of food to patient for the duration of stay in the establishment, etc., will enjoy
the exemption whether billed separately or as a consolidated tariff as the principal
supply is exempt.
Q113. Who is a paramedic?
A113. Paramedic is a healthcare professional in an auxiliary capacity providing services in
emergencies or extended duration care. They are trained professionals whose training,
certification and services are regulated but have limitations in their field of work.
Q114. Are ‘other associated’ functions provided by the establishment exempt from tax?
A114. Yes, if the services are ‘inextricably’ linked to the healthcare service provided, it would
be exempt such as in-patient room tariff, nursing care, lab charges, etc. If the
consideration received is principally linked to the principal supply.
Q115. Are ‘non-healthcare’ services exempt?

22. A115. No, they are taxable. It is not uncommon to find ‘healthcare centers’ to be undertaking
a variety of activities that do not qualify as ‘healthcare’ such as collecting charges from
operator of canteen, vehicle parking management fee, cell phone tower installed on
roof-top, etc.
Q116. Are ‘academic auxiliary’ services exempt?
A116. No, services provided by a healthcare center for permitting medical students of a
medical-college to be affiliated and gain practical-exposure by witnessing healthcare
services being provided to patients is not by itself healthcare services. Hence, the
‘outward supply’ by the healthcare center to the medical-college is not eligible to this
exemption and is a taxable supply.
Q117. How are services of a diagnostic lab or radiology center eligible for this exemption?
A117. The services exempt under this notification are those which have an inextricable nexus
with diagnosis, treatment or care. Services of a diagnostic lab or radiology center are an
integral part of this process of diagnosis, treatment or care. Interaction with the patient
is not the only form of engaging in diagnosis, treatment or care. Interface with the
patient’s sample or patient’s health records/reports can also be an integral part of
healthcare services.
Q118. Are services of pharmaceutical research eligible for this exemption?
A118. No, services of a pharmaceutical research are more proximate to drug discovery/drug
development than healthcare service. It is true that drug discovery/drug development
ultimately results in healthcare services but before that it results in manufacture
medicaments for sale.
Q119. Are there any healthcare activities provided by a clinical establishment that do not
qualify for any exemption?
A119. Yes, sale of goods – medicaments – directly to out-patients, walk-in purchasers and
those purchased by attenders of in-patients (replacement or administration) would be
liable to GST at the applicable rates. Utilization of stock of medicaments by the clinical
establishment for direct administration to the patient during casualty or in-patient
treatment or during surgery will not be treated as sale of goods as it would be an
ancillary supply involving goods for the composite supply involving healthcare service.
Q120. Are there any activities provided by clinical establishment that do not qualify as
healthcare services and why?
A120. Yes, consideration received by a clinical establishment for carrying out trials of various
medicaments and healthcare equipment would be taxable. This consideration is not for
rendering healthcare services but for accepting to conduct those trials and to provide
their expert opinion/feedback to the respective manufacturers. Consideration for
healthcare services is received by the clinical establishment from the patient and not
from the manufacturers of these medicaments or equipment. To qualify as healthcare

23. services, supply by the clinical establishment should involve interface with a patient or a
patient’s sample or patient’s health records/reports. Activities performed devoid of
interface with the patient or patient’s sample or patient’s health records/reports is a
contra-indicator to claim this exemption.
Q121. Are there any activities provided by a registered medical practitioner that do not qualify
as healthcare service and why?
A121. Yes, services performed by a registered medical practitioner such as providing expert
opinion in medico-legal inquiry/case, providing lectures to corporates on various health
issues, participating in seminars and conferences on latest medical practices, procedures
and methodologies, etc. Although these services require the trained mind of a
registered medical practitioner, since they do not interface with the patient or patient’s
sample or patient’s health records/reports and are non-specific, though relating to the
subject, they are services beyond the scope of this exemption.
Q122. Are all ‘inward supplies’ also exempt?
A122. Yes, only if the ‘inward supplies’ also qualify as ‘healthcare service’. But, all inward
supplies are ‘not’ healthcare service and those would be outside the scope of this
exemption. For example, inward supply of food to this establishment by canteen
operator is taxable because supply of food is not ‘inextricable’ with exempt output
supply and this service provider is not found in the list of specified service providers.
But, inward supply of services by a qualified medical doctor is exempt because services
of this doctor is inextricably linked with the healthcare services provided by this
establishment and the doctor is included in the list of specified service providers.
Q123. Are services of a qualified medical doctor alone covered by this exemption?
A123. Yes, services of a nurse and other technicians are also exempt by applying the
‘inextricable nexus’ test discussed in Q122. And if they are employees of the
establishment then their services are otherwise excluded from GST under sch III.
Q124. Are services of medical students in their final year of study, exempt?
A124. Yes, services of medical students during their period of residency in their final year of
study are also exempt but not under this entry. Amount paid may take either of the
following forms:
a) payment may merely be to defray incidental expenses – it is not consideration;
b) they are not (yet) qualified to be a supplier – it is not supply; or
c) due to employer-employee relationship – it is excluded from GST under sch III.
Q125. If medical students are considered ‘employees’, will PF and ESI also apply?
A125. No, to be liable to PF and ESI, the requirement of those laws is that the heath-care
center must qualify as a ‘specified employer’. Treatment under such allied laws will have
a bearing in the application of any exemption but not without first being subject to the
requirements of those laws that may be at variance to GST law.

24. Q126. Are ‘other support’ services received by healthcare center exempt?
A126. No, services by suppliers of ‘other support’ services to such a healthcare establishment
are taxable such as book-keeping services, general management and administration
services, security and housekeeping services, equipment leasing and rental services, you
could maintenance contract services, services of board of directors, software support
services in relation to healthcare records maintenance and management, building
repairs and maintenance services, construction services, parking management services
and this list goes on.
Part G – Reverse Charge
Q127. What is ‘reverse charge’ and how does it apply to NPOs?
A127. ‘Reverse charge’ is where tax that is payable by the supplier is required to be paid by the
recipient. Reverse charge is of two kinds – specific and general, namely:
a) Specific Reverse Charge is where purchase of goods or services are listed in the
respective notifications (4/2017-Int for goods and 10/2017-Int for services) and
when an NPO purchases the goods and services listed in these two notifications, the
NPO – even if exempt in respect of all other activities – is required to specifically
register and discharge tax in respect those of purchases; and
b) General Reverse Charge is where an NPO registered for other reasons – undertaking
any taxable supply or covered by the specific reverse charge notification – purchases
goods or services from persons who are not registered (for any reason whatsoever),
the tax applicable on such purchases will become payable by the registered NPO.
Q128. In case of supplies attracting – payment by reverse charge – the supplier agrees to pay
the tax, is the recipient excluded from this responsibility?
A128. No, the obligation of reverse charge is not negotiable and even if the supplier agrees or
in fact proceeds to discharge the tax (that was not required to be paid by him), the
recipient continues to be liable to pay the tax on reverse charge.
Q129. What kinds of payments attract General Reverse Charge for NPOs?
A129. NPOs purchase goods and services regularly from suppliers who have small businesses,
casual labourers, non-recurring repair/maintenance worker case of small value
materials/food items, etc. These purchases attract payment of tax on reverse charge
basis.
Q130. Is tax applicable to remuneration paid to ‘religious priests’ on General Reverse Charge?
A130. No, payments to religious priests are not taxable as religious priests are generally under
an employment contract with the religious institution and remuneration received from
employer is excluded from GST under sch III.
Q131. Are payments to religious priests by religious institutions always exempt?
A131. No, not in every case.

25. Q132. What are the implications if employer-employee relationship does not exist between
religious institution and religious priests?
A132. Even though employer-employee relationship does not exist, inquiry into the nature of
the above taken by the religious priests before entering religious service must be
examined. In several cases, religious priests relinquish their right to employment and
dedicate their lives to the service of their faith. Such religious priests cannot be engaged
in any form of taxable supply to attract reverse charge liability to the religious
institution. In case of other religious priests, remuneration paid to them by the religious
institutions attracts liability under General Reverse Charge.
Q133. Can payment to religious priests be exempted as ‘charges for performance of religious
ceremony’ (sl.no.14(a), see Q47)?
A133. Yes, but only if it is a directly related to the performance of a religious ceremony. In
other words, if payments are made even when no religious ceremony is performed on a
given day, then it would not be exempt. And if no other exemption is available (see
Q130 to 132), then the institution will need to discharge tax under General Reverse
Charge.
Q134. Is ‘general allowance’ paid also excluded?
A134. No, general allowance paid, whether recurring or not, would not come within the
exemption and it would attract tax liability on General Reverse Charge payable by the
religious institution.
Q135. Can the principles discussed in Q130 to Q132 apply to other instances in NPOs?
A135. Yes, it would fully apply in the following instances:
a) Payments to part-time lecturers by an educational institution;
b) Payments to all unregistered suppliers of general purposes goods and services by all
NPOs (see Q129).
Q136. Why is General Reverse Charge applicable to part-time lecturers engaged by educational
institutions but not applicable to medical practitioners engaged by healthcare centers?
A136. General Reverse Charge applies only when the underlying transaction is taxable.
Educational services are exempted only when provided ‘by’ an educational institution
and though the services of the part-time lecturer (not being an employee) relates to
imparting education, the exemption is very specific. Whereas, healthcare services are
exempted regardless of ‘who’ is providing the services and the services of the medical
practitioner though provided to (the patient through the) healthcare center, it comes
within the scope of the exemption.
Q137. Is there any special exemption if the transactions are undertaken by NPOs in foreign
currency?
A137. No, there is no special exemption based on the currency in which the transactions are
undertaken.

26. Q138. Is input tax credit allowed in case of payments made under Specific or General Reverse
Charge?
A138. If the outward supply is taxable and the inward supply in respect of which tax is paid
under Specific or General Reverse Charge, credit is available.
Q139. If taxable transactions of NPOs are ‘less than 10 per cent’ of the total transaction
volume, is there any concession in the GST compliances?
A139. No, absolutely not. The full extent of GST compliances apply NPOs even if they become
liable to register for a small value of taxable transactions.
Part H – Free Activities
Q140. How can GST apply when goods/services are provided ‘freely’ to an NPO?
A140. Goods/services provided ‘freely’ must be donation or voluntary contribution (see Q13 to
Q15) to be excluded from tax. If not, they will be taxable inward supply to NPO.
Q141. What if suppliers to NPOs are unregistered?
A141. If the NPO is registered, the tax that applies to the supplies by the supplier will need to
be discharged by the NPO on General Reverse Charge in respect of these inward
supplies.
Q142. What if a transaction is not recorded in the books of an NPO?
A142. No trail, no tax.
Q143. But how can tax be demands on transactions not recorded in the books?
A143. Very often transactions that are not recorded in the books (for any reason) come to light
from contemporaneous correspondence or accounting entries concerning these
transactions being discovered in others’ books and records.
Q144. What kinds of transactions need attention under this category of – free activities?
A144. It is advisable to take note of the following transactions:
a) all nominal value transactions – as they indicate presence of extraneous
consideration in non-monetary form
b) mutually setting-off transactions – GST makes barter and exchange also taxable; or
c) those that are not recorded in the books – all transactions are to be properly
classified, tax liability identified, reported and discharged so as not to attract
adverse consequences to the institution.
The above guidance applies both to inward supplies as well as outward supplies.
Q145. What is the value at which all transactions be carried out?
A145. While transactions are generally required to be carried out at prices that apply between
unrelated persons which is the sole consideration exchanged.
Q146. What happens when ‘special circumstances’ exist, which is so common in NPOs?
A146. GST is required to be discharged as its open market value (OMV).
Q147. Isn’t is possible that transaction can be undertaken at below OMV?

27. A147. Yes, it is not inconceivable that transactions are undertaken at far lesser values than
OMV. But, such circumstances indicate that there may be some non-monetary
consideration also flowing to the supplier. Then the aggregate value becomes taxable.
Q148. What’s the remedy if transactions are undertaken at less than OMV?
A148. This is possible because the cost of operations of the supplier of the services may itself
be lower than to others and to expect all suppliers to transact at open market value may
be unusual. In such cases, after establishing that there no extraneous consideration, a
transaction ‘below OMV’ could be accepted provided the transacted-value at least
covers costs adequately.
Q149. Any caution to be exercised in such transactions?
A149. Yes, as these principles are yet to be tested, caution is advised in respect of all ‘nominal’
value transactions especially when involving associated entities that are under same
administration/management.
Q150. What is the effective date of applicability of all the above to NPOs?
A150. All GST compliances are applicable to NPOs from the date of introduction – July 1, 2017
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