The Central Board of Indirect Taxes and Customs (CBIC) finds itself in a fix over a request from the Ministry for Culture.
The Ministry wants CBIC to set up a mechanism to refund Central GST and Integrated GST on food items purchased by religious organisations, such as gurudwaras, to provide free meals to devotees. But the CBIC is unable to decide on the ways and means.
Officials from the Culture and Finance ministries met last week to formulate a mechanism.
“Since the Culture Ministry has no expertise in refunds, it was proposed that the funds be handed over to the CBIC, which in turn will ask its field officers to verify the vouchers and pay the refunds accordingly,” a government official who attended the meeting told BusinessLine.
The Centre has introduced a new scheme, ‘Seva Bhav Yojana’, under the Culture Ministry. Initially designed for FY19 and FY20, the scheme will have a financial outlay of ₹325 crore. Under the scheme, “CGST and the Central government’s share of IGST paid on the purchase of specific items by charitable religious institutions for distributing free food to the public shall be reimbursed as financial assistance by the Government of India,” said a May 31 order issued by the Culture Ministry.
The official said the CBIC is unable to fathom under which budget heads it will receive the funds from the Culture Ministry and refund them subsequently.
The GST collected on any goods or service is distributed equally between the Centre and the States as CGST and SGST. In the case of inter-State trade, IGST is levied, which is the equivalent of CGST and SGST. If IGST is included, CGST and SGST will not be levied.
Barring exempted categories, as decided by the GST Council, all goods and services attract GST at specific rates, ranging from 0.25 to 28 per cent, while some goods and services also attract cess which could go up to 25 per cent.
Now, if the Centre or a State wants to give a specific benefit, it is possible only as a refund. Detailed guidelines are to be issued, mentioning which organisation will get the refund and how.
The vouchers have to be verified by chartered accountants before submission for refund.
“There will also be penal provisions and action for fake vouchers. Organisations submitting fake vouchers will be blacklisted and action can be taken against the CA who certified it,” the official said.
The plan is to give refunds to religious institutions registered under the Society Act or its equivalent.
The basic guidelines are being worked out. For instance, free prasad or langar/bhandara (community kitchen) operated by charitable religious institutions such as gurudwaras, temples, religious ashrams, mosques, dargahs, churches, monasteries and so on at least on a weekly basis are eligible for GST refunds.
The CGST/IGST refund is on ghee, edible oil, sugar/jaggery, rice, atta/maida/rava/flour and pulses.
To be eligible, the institutions have to serve free food to at least 5,000 people in a month.
While private enterprises are not eligible for a GST refund, those run by statutory religious bodies, religious institutions, and so on are eligible for it.