Mumbai: The Goods and Services Tax (GST) that will rollout on July 1 is likely to be a spoilsport for fundraisers organised by non-government organisations and non-profit clubs as the total cost incurred in holding them would go up by at least 20 per cent.
Clubs and NGOs usually hold their meetings or charity events in hotels and incur a high cost of food and beverages. In the GST regime, ordinary hotels will attract GST of 18 per cent while five-start hotels will attract GST of 18 per cent.
Moreover, GST bars the credit of expenses incurred for activities that may not be directly related to the business, like the cost of food and beverages. Thus, they would not be able to get an input credit of the food and beverage expenses unlike in the existing tax structure.
Many of them have been complaining that post GST they would not even receive the input credit on GST paid on the fees that their members pay. “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, Indirect Tax, KPMG India, in an article in the Economic Times.
Clubs like Lions Club or Rotary Club collect subscription from their members and pay a yearly fee to the parent body. A number of such clubs reckon that GST could mean double taxation for them.
According to Ashok Mehra, a chartered accountant, who tackles the finances of many clubs, earlier these clubs would get an input credit of about 10.15 per cent to 14.5 per cent. "(Under the GST era) 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,” he said.