Ever since the Goods & Service Tax (GST) came into effect, it has impacted Section 8 companies just like any other type of company. Let us explore whether GST registration is required for a Section 8 company and more details about it in this article. The primary reason for forming a Section 8 company Registration is to promote non-profit goals such as trade, commerce, arts, charity, education, religion, environmental protection, social welfare, sports research, and so on.
A Section 8 company needs to have two directors at minimum. Additionally, no minimum paid-up capital is needed for a Section 8 company. A non-profit organization in India can be registered with the Registrar of Societies or as a non-profit company under Section 8 of the Companies Act, 2013.
If this company makes any money at all, it puts it into achieving its goals rather than giving its shareholders a dividend. Under the old Companies Act of 1956, a Section 8 company was the same as a Section 25 company. Section 8 has been renamed as Section 25 of the Companies Act of 2013.
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About GST for Section 8 Company Registration, kindly be informed that a Section 8 company needs to register with GST if it is governed by the GST Act. A number of businesses in the industry provide Section 8 firms with GST and company registration services. The cost of registering a Section 8 corporation is more than that of a similar kind of organization, such a trust. The rationale is that in addition to numerous other regulations, a Section 8 firm needs clearance from the Central Government.
Transform your social idea into a compliant entity with LegalRaasta’s Section 8 company registration, tailored for impactful nonprofits.
Anybody who does business in India and is registered or obliged to be registered under the GST Act is considered a taxable person under the Act. Anybody who does economic activity, such as trade or commerce, is considered taxable.
Individuals, HUFs, companies, firms, LLPs, an AOP/BOI, any corporation or government company, body corporate incorporated under the laws of a foreign country, co-operative societies, local authorities, governments, trusts, and artificial juridical persons are all considered persons in this context.
Even though trusts, societies, and Section 8 Registration is included in the GST definition of taxable persons, they cannot be identified as such under the GST if they do not engage in economic activities like trade and commerce. But according to Maharashtra’s GST Authority of Advance Ruling (AAR), non-profit organizations’ goods and services that they charge for are considered supply and are therefore subject to GST.
The ruling also mandates that charitable organisations register under GST if their yearly revenue from sales of goods and services above ₹20 lakh. Therefore, if a non-profit receives more than ₹20 lakhs in revenue from sales of goods like stationery or honey in a given fiscal year, it is required to register under the Goods and Services Tax (GST). GST is also applicable to non-profits that offer services, such as teaching young women computer literacy.
This means even if a firm is charitable, GST will be imposed on their products or services if its income from the supply of goods and services exceeds ₹20 lakhs in any financial year. The cost of paying the GST will fall on the customer. Nevertheless, it raises the non-profit’s expenses related to accounting and regulations.
Certain charitable operations as defined by the GST Act are free from this indirect tax, regardless of the amount of their fee-based sales. Regretfully, the definition of “charitable activities” under the GST Act is extremely narrow and limited, encompassing only those activities that are connected to:
As a result, if a non-profit charges a fee for counselling services to terminally ill people and earns more than ₹20 lakhs from these services in a particular financial year, it is not required to charge GST for the services it provides. However, to claim this exemption, it is still necessary to register for GST.
The Income Tax Department may recognize non-profits registered under Section 12A or 12AA of the Income Tax Act of 1961 as tax-free. However, the non-profit’s income from direct taxes is the exclusive source of the tax exemption. There are no exclusions from indirect taxes like GST offered by it. The organization cannot claim GST exemption on the rent if it operates out of a commercial office building and shows the landlord its 12A or 12AA certificate.
Similarly, when a non-profit buys items like computers, laptops, tablets, or a car for its charitable endeavours, it is not shielded from GST by virtue of its purported “tax-exempt” status (from direct tax). GST is charged to non profit organizations for whatever goods and services they get. Therefore, a non-profit is merely an ordinary customer or client of a company that sells goods or offers services.
GST (Goods and Services Tax) Registration offers several benefits for Section 8 companies, which are non-profit entities dedicated to promoting commerce, art, science, sports, education, research, social welfare, religion, charity, and environmental protection. Here’s how GST registration can be advantageous for Section 8 companies:
1. Legal Recognition and Compliance: Section 8 Company Registration under GST ensures that the organization complies with the laws and regulations set by the government. This legal recognition enhances the credibility of the Section 8 company and can help in gaining the trust of donors and stakeholders.
2. Input Tax Credit: One of the primary benefits of Section 8 Registration companies is the ability to claim Input Tax Credit (ITC). This means that the company can claim a credit for the GST paid on purchases, which can be set off against the GST payable on their supplies. This reduces the overall tax liability.
3. Improved Funding Opportunities: Section 8 Company Registration under GST can improve funding opportunities. Donors and grant providers often prefer dealing with registered entities as it assures them of the company’s authenticity and adherence to regulatory norms.
4. Expansion and Outreach: With Section 8 Registration, companies can engage in interstate transactions without any restrictions, allowing them to expand their reach and impact. This is particularly beneficial for organizations working on nationwide projects.
5. Cost Savings: By claiming input tax credits, Section 8 Company Registration can reduce their operational costs. This means more funds can be allocated towards their primary objectives and social missions rather than tax expenses.
6. Competitive Edge: GST-registered Section 8 companies might have a competitive edge over non-registered entities when applying for tenders or entering into contracts with government and large corporations, as registration is often a prerequisite.
7. Transparency and Accountability: Section 8 Company Registration under GST ensures greater transparency and accountability in financial transactions. This can be beneficial for audit processes and enhances the overall governance of the organization.
8. Simplified Taxation: GST consolidates various indirect taxes into a single tax, simplifying the tax structure for Section 8 companies. This means less paperwork and easier compliance with tax regulations.
To Sum up, Section 8 Company Registration under GST provides numerous benefits that can significantly aid in the efficient functioning and growth of the organization. It not only helps in legal compliance and financial management but also enhances credibility and operational efficiency.
In the past, Section 8 Registration were thought of as special purpose vehicles (SPVs) that functioned as tools and were the main force behind the government’s efforts to carry out the social welfare initiatives that it has always desired but has been unable to implement for a variety of reasons.
These businesses serve as a direct conduit between society and individual well-being. They provide a forum for people to unite and work toward improving society, their local communities, and ultimately the entire world. For additional details on Section 8 Company Registration, contact our LegalRaasta Experts. Additionally, we provide GST services such as GST filing, GST registration, and GST advisory services. Please fill out the online registration form with your information, and our legal experts will contact you for assistance at the earliest.
By ensuring GST compliance, Section 8 companies can continue to thrive and contribute meaningfully to their respective causes. The regulatory landscape may seem daunting, but with the right guidance and support, these organisations can navigate the complexities of GST and focus on their mission to bring about positive social change.
For detailed assistance on Section 8 company registration, GST compliance, and other legal services, contact LegalRaasta today. Let us help you transform your social vision into a compliant, impactful reality.