GST for NGOs

Donations and grants given with nothing in return carry no GST, and services that a registered charity provides by way of defined “charitable activities” are exempt. But GST applies to supplies, not to organisations. An NGO that sells goods, charges fees, rents out space or takes sponsorship can owe it, and must register once its turnover crosses the threshold: ₹20 lakh for services (₹10 lakh in some north-eastern states) or ₹40 lakh if it supplies only goods.

This guide explains when an NGO must register, what the charitable-activities exemption covers, how donations, grants, CSR money, sponsorship, sales, fees and rent are treated, input tax credit and the September 2025 rate changes, with worked examples. It is for NGO finance teams and the chartered accountants (CAs) who advise them.

GST applies to supplies, not to organisations

Goods and Services Tax (GST) is charged on supplies of goods and services made for a consideration. Being a charity doesn’t take an NGO outside GST; particular supplies are exempt. Two mistakes follow from forgetting this: thinking that “NGOs don’t pay GST”, and thinking that “all charity work is exempt”. Neither is true.

For most NGOs, GST matters mainly on the other side: they pay it on what they buy, and, unless they are registered and make taxable supplies, they can’t claim it back. Budget for it in every proposal: see budgeting a proposal.

When an NGO must register

Under section 22 of the Central Goods and Services Tax Act, 2017 (the CGST Act) and Notification 10/2019-Central Tax, registration is needed once an NGO’s all-India aggregate turnover in a financial year crosses:

Aggregate turnover includes exempt supplies as well as taxable ones (section 2(6) of the CGST Act), so exempt charitable services count towards the threshold. Donations and grants aren’t supplies, so they don’t.

You don’t need to register if you supply only goods or services that are wholly exempt or not taxable, or if all your taxable supplies are ones on which the recipient pays the tax under reverse charge (Notification 5/2017-Central Tax). So a trust whose only taxable supply is sponsorship for companies needn’t register. Voluntary registration is allowed.

The exemption for charitable activities

The main exemption is entry 1 of Notification 12/2017-Central Tax (Rate): services by an entity registered under section 12AA or 12AB of the Income-tax Act, 1961, by way of charitable activities, are exempt. Two conditions must both be met: the NGO must be registered for income-tax exemption, and the service must be a “charitable activity” as the notification defines it.

It is a closed list. A skills course for homeless children is exempt; the same course for college students in general isn’t covered by entry 1. Other services a registered charity provides, such as consultancy, general training, event management and renting, are taxable unless another entry exempts them.

Donations, grants and CSR money

A gift or grant for which the donor gets nothing in return isn’t consideration for a supply, so it carries no GST.

Recognising donors is usually fine. CBIC Circular 116/35/2019-GST (11 October 2019) clarifies that when a charity displays an individual donor’s name with no reference to a business, such as “Donated by…”, no GST arises. If the display advertises a business, with its logo, products or contact details, it is a taxable advertising service.

The question to ask of any funding is whether the funder gets something in return. Publicity, a service delivered to the funder itself or deliverables the funder owns may make a payment consideration for a supply. CSR grants for a project the NGO runs for its beneficiaries, with reports on how the money was used, are normally outside GST. If a CSR agreement makes the NGO deliver services to the company, or gives the company advertising in return, look at it again with your CA. Some companies ask NGOs for a GST number by habit; an NGO that doesn’t need to register can explain why.

Sponsorship

Sponsorship is a taxable service, not a donation. Who pays the GST depends on who is sponsored and who sponsors.

Under Notification 13/2017-Central Tax (Rate), serial 4, GST on sponsorship provided to a body corporate or partnership firm is paid by the sponsor under reverse charge. Since Notification 07/2025-Central Tax (Rate) of 16 January 2025, that applies only where the supplier is “any person other than a body corporate”.

Selling goods, fees, membership and rent

The income-tax side of earning money is in when a charity can earn.

Input tax credit

A GST-registered NGO can claim credit for the GST it pays on goods and services it uses to make taxable supplies. Three limits matter to NGOs:

• Exempt supplies get no credit. Where something is used for both taxable and exempt supplies, the credit is restricted to the taxable part (section 17(2) of the CGST Act), worked out by a formula in the GST rules that broadly follows the split of turnover.
• Goods given away get no credit. Credit is blocked on goods disposed of by way of gift or free samples (section 17(5)(h)), as CBIC Circular 92/11/2019-GST explains. So relief kits, books or blankets distributed free don’t earn credit, even for a registered NGO.
• No registration, no credit. An unregistered NGO can’t claim anything back: GST on its purchases is simply a cost.

The September 2025 rate changes

The 56th meeting of the GST Council, on 3 September 2025, moved most goods and services to two rates, 5% and 18%, with a special 40% rate for a few luxury and “sin” goods, from 22 September 2025. For NGOs it mainly changes what they pay on purchases. Notification 16/2025-Central Tax (Rate) amended Notification 12/2017 from the same date, but we found nothing in it that changes entry 1 or the definition of charitable activities.

Once you are registered

• Issue a tax invoice for every taxable supply, and keep taxable, exempt and reverse-charge supplies apart in your books.
• File your GST returns on time, monthly or quarterly depending on your turnover and the scheme you choose.
• Check each new income stream, such as a sponsorship deal, a paid course or a shop, before you start it.

Common mistakes

• Assuming charities are outside GST, and missing the registration threshold.
• Forgetting that exempt supplies count towards the threshold.
• Treating sponsorship as a donation, or charging GST on a company sponsorship that the sponsor should pay under reverse charge.
• Claiming credit on goods given away, or on costs of exempt work.
• Assuming a new Section 332 registration brings the old entry 1 exemption without checking.

GST turns on the facts of each arrangement, so ask a CA to look at sponsorship deals, paid courses and any trading before you start them.