JUNE 05, 2017

By Dr Nilesh V Suchak, CA and Punit Prajapati, CA

MANY of the religious places provide prasadam in their precincts which is satisfying meals like lunch or dinner or breakfast but call it "prasadam". They charge token amount for such ‘prasadam' and there is no intention of making any profit out of such charge but sometimes such amount charged is highly subsidized out of other donations by the religious places. Such prasadam is provided to facilitate the pilgrims visiting such religious places and as a part of the activities related to advancement of religion or spirituality. Will such amount received by religious places like Tirupati Balaji Temple, Somnath Temple and other such religious places attract levy of GST is a moot question that arises after going through the provisions of Central Goods and Services Tax Act (CGST Act), 2017 and the list of exemptions and rates put in the public domain.

According to the GST rate schedule for goods as discussed in the GST Council Meeting held on 18-19 May, 2017, rate of GST on Prasadam [2106] supplied by religious places like temples, mosques, churches, gurudwaras, dargahs, etc. is Nil. It appears clear that ‘prasadam' like laddus, chikki, or in any form gets clearly covered in this entry and any amount charged for such items would attract Nil rate of GST. However, the pertinent issue is whether the meals like lunch and dinner or breakfast as provided by such religious institutions by charging a token amount can come within scope of supply of prasadam or not. It appears that the "prasadam" should include even food supplied by religious places as such food is also called "prasadam" at such religious places when provided by religious places. In view of this, a view is possible that such bhojan (meal) "prasadam" will attract Nil rate of GST.

In terms of provisions of section 7(1)(a) of the CGST Act, 2017, the expression "supply" includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. It appears that a religious place supplying "prasadam" in the form of satisfying meals cannot be said to be supplying the same in course or furtherance of any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity. Hence, it appears that such supply of food "prasadam" by religious places should not be considered to be in the course or furtherance of business and hence the same may not be considered as "supply" under this clause.

However, in terms of provisions of section 7(1)(d) of the CGST Act, 2017, supply includes the activities to be treated as supply of goods or supply of services as referred to in Schedule II. In terms of clause (b) of Paragraph 6 of Schedule II, the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration shall be treated as supply of service. Accordingly, for prasadam in the form of meals or breakfast supplied by the religious places, if a view is taken by the tax authorities that such activity is clearly to be treated as a supply of services and not that of goods, there are chances of disputes between such religious places and the tax authorities if such religious places have not paid any tax considering it to be goods in the form of prasadam which are chargeable at nil rate of GST. In the pre-GST regime, most of these religious places would not face any problems as they normally do not provide such bhojan (meal) prasadam in an air-conditioned area and all s services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year is exempt under Entry No. 19 of Notification No. 25/2012-ST, dated 20-06-2012 as in force from 01-07-2012. However, since the proposed list of exempted services for GST regime does not include even non-air-conditioned premises supplying food, there are chances of unwarranted litigation if department demands GST on such activity of supplying bhojan prasadam by taking a view that exemption granted to non-air conditioned joints is now no more applicable.

It may also be noted that services by an entity registered under section 12AA of the Income tax Act, 1961 by way of charitable activities are proposed to be exempted from GST. It is also stated that "Charitable activities" may be defined as presently in notification No 25/2012-ST. The said meaning of "charitable activities in Notification No. 25/2012-ST also includes activities relating to advancement of religion or spirituality. These religious places are carrying out activities relating to advancement of religion or spirituality. Providing prasadam to pilgrims visiting religious places is one of the activities relating to advancement of religion or spirituality and hence even if the activity of supplying bhojan (food) prasadam is treated as service, the same should get exemption under this entry.

It has been a rich tradition of our nation that most of the religious places provide bhojan Prasad to persons visiting such places at very nominal charge. These religious places play an important role in advancement of religion and spirituality. Government should unambiguously provide for or clarify that bhojan prasadam provided by religious places will not attract any GST so that administrators of such religious places do not have any doubt in their minds about taxability.

Dr. S. L. Peeran, Retired Member(J), CESTAT while participating on the occasion of celebration of Silver Jubilee of our honoured Tribunal, had stated in 2007 as under -

"The Government in its anxiety to increase its collection of Taxes has left no stone unturned to bring within its ambit all and sundry items for Taxation. We had an interesting case wherein the Government proposed to levy tax on "Prasadam" distributed by temples without exception to the "Prasadam" in the form of "ladoos" distributed by Tirupathi Devasthanam. The question before us was as to whether "Prasadam" can be taxed? So long as "ladoos" are sold in the market as goods, they are taxable. However, once they are presented before the deity and assume a form of "Prasadam" or "Taburruk" can it be taxed as commercial commodity? But, the tax authorities had a different view. They considered the "Prasadam" as commercial goods, as some money was being collected towards distribution of the "Prasadam". But the Tribunal applied the principles of sound reasoning, good conscience and fair mindedness to hold that offerings on the altar of the Lord cannot be considered as a commercial commodity. The Government later issued a notification exempting the "Prasadam" from Tax."

We hope that the present Government also applies the principles of sound reasoning, good conscience and fair mindedness and categorically provides for or clarifies that even bhojan prasadam provided by religious places will not attract levy of GST.