As GST is implemented on all goods and services, taxpayers registered with the GST council are mandatorily required to pay the tax and file returns. Since its implementation in July 2017, GST collection has been on the rise year on year.
The first year, i.e., FY 17-18, saw a total collection of Rs. 7.41 Lakh Crore, while the collection for FY 2018-19 (till date) stands at Rs. 5.18 Lakh Crore for states alone.
While this GST information presents a positive trend, other aspects like the application of GST on specific items is still undecided, thus leaving scope for further inclusions. One such item that remained a matter of discussion regarding GST imposition is the fee levied on adoption.
The verdict regarding GST on adoption fees - The latest update
As per the latest verdict from AAR Maharashtra Advance Rulings on 4th October 2019, the receipt for adoption fees that prospective parents pay to a trust for child adoption will not attract GST.
These payments come under the Adoption Regulations 2017, Sub-Regulation 46. It is because these activities are considered charitable activities and do not come under the scope of GST applicability. Moreover, as per GST information, indirect tax is payable only on items that come under the purview of goods and services.
To understand the exclusion of adoption fees from tax applicability, one must, therefore, first know what is GST. Check out the information given below to know its applicability.
GST – Definition and scope
As per the Central Board for Indirect Tax and Customs (CBIC), the taxable event in case of GST is the supply of either goods or services, thus the name Goods and Services Tax. It is unlike the previous system, when indirect taxes were levied on various taxable events like sale, manufacture, purchase, services rendered, etc.
The scope of GST extends to the following cases –
- Supply of either goods or services or both.
- A consideration is involved in supply.
- The supply occurs during the course of business.
- Goods or services supplied are taxable.
All about GST applicability and payment is covered under this scope. The information is thus an essential part of everything you need to know about GST.
Nevertheless, adoption through a trust on payment of adoption fees is not chargeable as per CBIC’s GST information. Firstly, the consideration (adoption fees) paid is not in the course of business (adoption – a charitable activity and not business).
Secondly, adoption does not fall under the supply of either goods or services. Thirdly, the verdict passed by the AAR Maharashtra in favour of the applicant Children of the World (India) Trust, Bombay recognises it as a charitable institution registered under Section 12 AA of the Income Tax Act, 1961.
The activities undertaken by the trust and such similar trusts are thus considered charitable activities and remain tax-free. Other registrations and recognitions also deem the trust’s activities outside the taxation criteria. Hence, while the latest impact of GST can be seen on several goods and services, adoption fees are not impacted.
Applicability and payment of GST – The requirements
As per the GST information provided by CBIC, a business needs to make GST payment before the due date every month and simultaneously file its return.
They can participate in several GST benefits that come with payment of this tax, like increased overall revenue due to the elimination of cascading effects.
Timely payment of GST also enables companies to avail business loans easily and infuse necessary capital for improved efficiency. These advances are available along with attractive features for easy repayment. NBFCs like Bajaj Finserv offer these loans at competitive interest rates to make repayment affordable.