17 April 2023
Sir, my query is in sponsorship service --- sponsor by : institute / trust. (Regd 12AA IT ACT __exempted in GST) Sponsorship event: Award samman service provided by : PVT LTD COMPANY (REGD IN GST). When pvt ltd company raised Invoice to institute/trust will company add GST to the invoice or not.
11 July 2024
In the scenario you've described, where a private limited company registered under GST is providing sponsorship services (Award Samman service) to an institute or trust registered under section 12AA of the Income Tax Act (exempted from GST), here's how the GST implications typically work:
1. **Nature of Supply**: The service provided by the private limited company (Pvt Ltd) to the institute/trust is a taxable supply under GST.
2. **Exemption to Institute/Trust**: Since the institute or trust is registered under section 12AA of the Income Tax Act, it falls under the category of entities exempted from GST. This means they do not have to pay GST on the services they receive.
3. **GST Treatment by Pvt Ltd Company**: - **Invoice Preparation**: The Pvt Ltd company should issue an invoice for the sponsorship service provided to the institute/trust. - **GST Applicability**: While the institute/trust is exempt from paying GST on the invoice amount, the Pvt Ltd company is still required to charge GST on the invoice. However, this GST amount will effectively be borne by the Pvt Ltd company itself (as the recipient is exempt).
4. **GST Calculation**: When preparing the invoice, the Pvt Ltd company should mention the GST amount separately. The rate of GST applicable would depend on the nature of the service provided (usually 18% for most services).
5. **Input Tax Credit (ITC)**: The Pvt Ltd company can claim input tax credit on the GST paid on inputs, input services, and capital goods used for providing the sponsorship service, provided all other conditions for claiming ITC are met.
6. **Legal Provisions**: As per GST laws, even though the recipient (institute/trust) is exempt, the supplier (Pvt Ltd company) is obligated to charge and remit GST on taxable supplies made by them.
**Conclusion**: Therefore, when the Pvt Ltd company raises an invoice for sponsorship services provided to the institute/trust, GST should be added to the invoice. However, the institute/trust being exempt under section 12AA of the Income Tax Act does not have to pay GST. The Pvt Ltd company will account for this GST in its GST returns and comply with the reporting requirements accordingly.
It's advisable to consult with a GST expert or a chartered accountant for specific advice tailored to your circumstances, as GST regulations can be complex and may vary based on specific details of the transaction and the nature of services provided.
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