goods and services tax
(GST) will play party-pooper to many fundraisers or charity events
organised by non-government organisations (NGOs) and non-profit clubs.
There is likely
to be a steep decline in events as the total landed cost of holding
them would increase by at least 20%.
Many clubs and NGOs that hold meetings or fundraising events would not
be able to get an input credit of the food expenses unlike in current
where they would get sales tax credit.
Not just that, many clubs and NGOs are complaining that under GST they
won’t even get input credit on GST paid on the fees paid by their
“Fundraisers may just become an expensive affair. In many cases, input
credit would not be available under GST food and beverages not to
mention the actual
cost of certain services, like say tax on entertainment tickets, is
pegged at 28%,” said Sachin Menon, Head,
Many clubs like Lions Club or Rotary Club fear that in a way there
could be double taxation for them under GST.
“Whenever we have fundraisers we have to organise events, but GST
could be a double whammy for us. Not only do we have to pay 18% GST on
fee we collect, when this is spent we also pay GST, but do not get
input credit for the same,” said Ravi Adukia, treasurer, Rotary Club
lubs like Lions Club and Rotary Club operate in a peculiar manner.
They collect fees from their members and pay an annual fee to the
The objective of these clubs is to collect funds for some social
activities. Fundraisers or events would normally be held at hotels.
While GST rate for
ordinary hotels is 18%, that on five-star and expensive hotels is 28%.
“We call high networth individuals for these fundraising events. The
objective is to collect funds and then donate it,” said an NGO
“We used to get an input credit for
of about 10.15% to 14.5% for both food and beverages cost as well as
subscription paid by members, which is not available under GST. For
us, it would
be double taxation as not only are we incurring GST at the rate of 18%
on subscription, we would get no input tax credit when that money is
spent on food
and beverages during an event,” said Ashok Mehra, a chartered
accountant who helps many clubs with their taxes.
The issue under GST is that the framework does not allow credit of
expenses incurred for activities that may not be directly construed as
related to business.
This would include expenses incurred for food and beverages.
Insiders say many clubs would now try to create structures that can
circumvent GST regulations. “The rules would force many clubs to limit
number of partners
and fees collected from them to stay out of GST net,” said a senior
official with a Mumbai-based club. “We don’t mind paying GST on the
but not allow input credit for food and beverage expenses incurred
during meetings or events is a huge expense for us,” he said.