GST- MAY-2024 Shri Digamber Jain Sidhkut Chaityalaya Temple Trust V. AAR Rajasthan

The recent ruling by the Authority for Advance Rulings (AAR) Rajasthan has generated a lot of interest and discussion among legal experts, religious institutions, and the public. The ruling pertains to the taxation of entry fees collected by religious trusts under the Goods and Services Tax (GST) Act. The ruling, which pertains to the case of In Re. Shri Digamber Jain Sidhkut Chaityalaya Temple Trust [Advance Ruling No. RAJ/AAR/2023-24/22 dated March 26, 2024], provides insight into an important aspect of GST law: how funds generated from religious activities are subject to taxation.

The AAR Rajasthan recently clarified whether the entry fees collected by the Shri Digamber Jain Sidhkut Chaityalaya Temple Trust, a religious trust registered under Section 12AA of the Income Tax Act, are subject to GST. The importance of this ruling is found in how it affects the overall system of taxing religious activities and charitable organisations in India.

The issue of whether entry fees collected by religious trusts should be considered taxable under the GST Act has been a topic of debate and uncertainty for many years. The ruling by AAR Rajasthan directly tackles this confusion, offering helpful guidance and establishing a standard for future cases of a similar nature.

The ruling provides clarity on the taxability of entry fees collected by religious trusts. This is beneficial for religious institutions and helps improve our understanding of GST laws in relation to charitable and religious activities. Furthermore, it highlights the significance of adhering to legal regulations and being transparent when managing religious trusts. It also emphasises the need to respect the religious and cultural importance of these institutions in Indian society.

Facts Of the Case

1. The Shri Digamber Jain Sidhkut Chaityalaya Temple Trust is a religious trust that is registered under Section 12AA of the Income Tax Act, 1961.
2. It holds a significant position in the world of Jainism. The trust was established with the main goal of promoting worship and puja in accordance with the Terapanth Sect of the Digambar Jain religion.
3. It is dedicated to organising various religious ceremonies and ensuring the proper maintenance and management of the temple's facilities and articles.
4. The trust is dedicated to fostering spiritual engagement and creating a place where devotees and pilgrims can connect with their faith.
5. The Temple Hall is a central part of this mission. It is a place where devotees come together for darshan, which is a sacred viewing, and for contemplation.
6. In order to support the maintenance and upkeep of the Temple Hall and continue its charitable goals, the trust has a practice of collecting entry fees from pilgrims, visitors, and devotees who come to see the temple.
7. The entry fees are really important for the trust because they help to bring in money. This money is used to cover the costs of running and maintaining the trust, as well as supporting other charitable projects.
8. It is common for religious trusts in India to collect entry fees for temple visits. The money collected is usually used to maintain the temple premises, provide basic amenities for visitors, and support religious and cultural activities.
9. The collection of entry fees for the Shri Digamber Jain Sidhkut Chaityalaya Temple Trust serves as both a source of financial support and a way for the community to show their dedication to maintaining a sacred space that holds great importance in their spiritual lives.
10. In light of the religious devotion and community support, the trust had a question about whether the entry fees they collected should be taxed under the GST Act.
11. To get clarification, they reached out to the Authority for Advance Rulings (AAR) Rajasthan.
12. The AAR Rajasthan made an important ruling in the case of In Re. Shri Digamber Jain Sidhkut Chaityalaya Temple Trust.
13.  This ruling gives us valuable information about how funds like these are taxed and classified under GST law. It has a significant impact on religious trusts and how they handle their finances in India.

Issue Raised in The Case

The Authority for Advance Rulings (AAR) Rajasthan recently dealt with a specific issue regarding the taxation of entry fees collected by the Shri Digamber Jain Sidhkut Chaityalaya Temple Trust under the Goods and Services Tax (GST) Act. The main issue here is whether the entry fees collected by the trust are subject to GST or if they qualify for exemption under the relevant provisions.

Whether entry fees taxable under GST?

1. The main question that the AAR Rajasthan is dealing with is about how to classify the entry fees collected by the Shri Digamber Jain Sidhkut Chaityalaya Temple Trust under the GST Act.
2. It is worth considering whether the funds collected from pilgrims, visitors, and devotees who want to see the Temple Hall, which is known as darshan, should be considered as taxable supply under GST regulations.

Judgment & Its Analysis

The Authority for Advance Rulings (AAR) Rajasthan made the decision about how entry fees collected by the Shri Digamber Jain Sidhkut Chaityalaya Temple Trust should be taxed under the Goods and Services Tax (GST) Act. Their ruling provided a clear explanation of how these funds should be treated for tax purposes.

 Understanding the interpretation of relevant GST laws and exemption notifications.

1. The AAR Rajasthan has interpreted that the provision of darshan and temple visits are considered as services provided by the trust as part of its business activities. This interpretation is in line with the wider definition of "supply" according to the GST Act. It includes all types of transactions, including services provided in exchange for payment.
2. The AAR Rajasthan mentioned the exemption notifications, specifically Sl. No. 1 of Notification No. 12/2017-Central Tax (Rate), which states that services provided by entities registered under Section 12AA of the Income Tax Act for charitable activities are exempt from GST.
3. The AAR assessed whether the services provided by the trust qualify as charitable activities and therefore fall within the scope of exemption.

The reasoning behind the decision is as follows:

1. The AAR Rajasthan acknowledged that the activities carried out by the Shri Digamber Jain Sidhkut Chaityalaya Temple Trust have a religious and charitable nature. 
2. They highlighted the trust's role in promoting worship, puja, and religious ceremonies in accordance with the Terapanth Sect of the Digambar Jain religion.
3. The trust helps devotees by offering darshan and organising temple visits, which promotes religious and spiritual involvement.

Are there any exemptions for charitable activities?

1. The AAR concluded that the services provided by the trust are considered charitable activities under the GST Act, based on their interpretation of relevant exemption notifications.
2. These activities, which are designed to promote religious worship and spiritual growth, are in line with the goals of charitable organisations that are registered under Section 12AA of the Income Tax Act.
3. The AAR Rajasthan referred to previous cases and legal precedents, such as a similar ruling made by the AAR Karnataka, to justify its decision.
4. The AAR Rajasthan referred to the ruling in the case of In Re: M/s Sri Malai Mahadeshwara Swamy Kshetra Development Authority to support the application of GST exemptions to entry fees collected by religious trusts for temple visits.

Concluding Remarks

1. The AAR Rajasthan has clarified the tax treatment of entry fees collected by the Shri Digamber Jain Sidhkut Chaityalaya Temple Trust under the GST Act through its ruling and analysis.
2. The AAR has confirmed that the entry fees collected by the trust are exempt from GST. This is because the trust's activities are charitable in nature and are related to the advancement of religion.
3. The AAR reached this conclusion by interpreting the relevant GST laws and exemption notifications.
4. This ruling is significant because it establishes a standard for future cases involving religious trusts. It also highlights the need to ensure that GST regulations are in line with the charitable goals of these organisations.

Legal Framework Under The GST Act

The Goods and Services Tax (GST) Act was introduced in India on July 1, 2017. Its purpose is to simplify the tax system by replacing multiple indirect taxes like VAT, excise duty, and service tax with a single comprehensive tax. The GST regime involves the taxation of goods and services at different rates. There are also various provisions that dictate how GST is levied, collected, and administered.

There are some important notifications about exemptions that you should know about. One of them is Notification No. 12/2017-Central Tax (Rate), which was issued by the Central Government on June 28, 2017. This notification gives exemptions from GST for certain types of goods and services. The ruling by the AAR Rajasthan is particularly relevant to Sl. No. 1 of this notification. This specific number exempts services provided by entities registered under Section 12AA of the Income Tax Act, 1961, through charitable activities from GST.

Let Us Understand This Exemption with the help Of a Table:

The table above showcases the exemption rates for certain services under the Income-tax Act, 1961.

1. Entry No. 1 mentions services provided by an entity registered under section 12AA or 12AB of the Income-tax Act, 1961, specifically pertaining to charitable activities. According to this entry, such services are exempt from tax, meaning they are not subject to any tax rate.
2. Entry No. 13(a) refers to services provided by a person involving the conduct of any religious ceremony. Similar to Entry No. 1, this entry also indicates a nil rate, meaning there is no tax applied to these services.

Both Entry No. 1 and Entry No. 13(a) of the Exemption Rate Notification specify services that are exempt from taxation, with a tax rate of nil.

The AAR's ruling aligns with existing legal provisions in the following ways:

1. The ruling by AAR Rajasthan is in line with the interpretation of GST laws, specifically regarding the definition of "supply" as stated in the GST Act. The AAR has upheld the broad scope of GST regulations by considering darshan and temple visits as services provided in the course of business activities.
2. Regarding exemption notifications, the ruling by the AAR aligns with the provisions stated in Notification No. 12/2017-Central Tax (Rate). This notification exempts services offered by organisations registered under Section 12AA of the Income Tax Act, specifically for charitable activities, from the application of GST. The AAR ensured alignment with the relevant legal provisions governing GST exemptions by applying this exemption to the services rendered by the Shri Digamber Jain Sidhkut Chaityalaya Temple Trust.
3. The recognition by the AAR of the charitable and religious nature of the activities carried out by the trust shows that it is in line with the overall goals of the GST Act. The AAR has reaffirmed the legal framework governing the tax treatment of religious trusts under GST law by stating that entry fees collected for temple visits can be considered as charitable activities related to the advancement of religion.
4. In general, the ruling by AAR Rajasthan shows a balanced understanding and implementation of the current legal provisions, such as the GST Act and relevant exemption notifications. The AAR ensured consistency and clarity in its decision regarding the taxation of entry fees collected by religious trusts by following the principles of taxation and charitable activities outlined in the legal framework.

Implications Of This Case:

The ruling by the AAR Rajasthan has important implications for religious trusts and charitable organisations throughout India. The ruling helps to bring clarity on how entry fees collected by religious trusts are treated for tax purposes. This promotes transparency and ensures that the trusts comply with GST regulations, while also acknowledging the religious and cultural importance of these institutions.

In the future, this ruling will serve as a precedent for cases involving the taxation of religious trusts under the GST Act. The Judgment highlights the significance of ensuring that GST laws are in line with the charitable goals of religious organisations. It also emphasises the need for consistency and fairness in tax administration.

However, there may still be challenges and questions, especially when it comes to determining which activities conducted by religious trusts qualify for exemptions and how they should be classified. In order to effectively deal with emerging issues and maintain a fair approach to taxation in relation to religious and charitable activities, it is crucial for religious institutions, tax authorities, and legal experts to engage in discussion.

Overall, the ruling by AAR Rajasthan provides valuable guidance when it comes to dealing with the intricate overlap of taxation, religion, and charity. The statement emphasises the need for clear laws and following regulations, while also valuing religious freedom and social welfare in India's diverse society.

Conclusion

The recent ruling by the Authority for Advance Rulings (AAR) in Rajasthan has provided important clarification on how entry fees collected by the Shri Digamber Jain Sidhkut Chaityalaya Temple Trust should be taxed under the Goods and Services Tax (GST) Act. This ruling is a significant step in understanding how funds generated through religious activities should be treated for tax purposes. The ruling highlights several key points:

The AAR Rajasthan has interpreted the applicable GST laws and exemption notifications, acknowledging that the act of providing darshan and temple visits is considered a service provided as part of business activities.

The ruling aligns with Notification No. 12/2017-Central Tax (Rate), which exempts services provided by entities registered under Section 12AA of the Income Tax Act through charitable activities from GST.

The trust's activities, which involve collecting entry fees for temple visits, are recognised as charitable and religious in nature. This recognition leads to the exemption of these fees as charitable activities that contribute to the advancement of religion.