When you receive grants, donations and sponsorship freely from the givers, and do not provide benefits in return to the givers, the amounts received do not attract GST (i.e. you do not need to account for GST on the grants, donations and sponsorships).
However, when you provide direct benefits in return to the giver of grants, donations and sponsorship, you are treated as making a supply. You have to account for output tax at the prevailing tax rate on the open market value (OMV) of the benefits.
When the OMV is not available, you should account for GST at tax fraction (7/107) on the money received or at the prevailing tax rate on OMV of goods or services received.
For more information and examples, please refer to Receiving grants and Receiving donations and sponsorship.
Donations to Registered Charities or Institutions of a Public Character (IPC)
Certain donations to registered charities or IPC are deemed to be pure donations even when there is a benefit given in return for the donations. The recipient of the donations need not account for GST.
To qualify for the concessionary tax treatment, the benefits must be treated as having no commercial value. The following conditions must be met:
- The benefit is given in acknowledgement of the donation; and
- The benefit has no resale value.
Input Tax Incurred for Wholly Business Activities
This refers to non-subsidised activities where you charge market rates for your goods and services and these activities are not funded by grants, donations or sponsorships. Input tax incurred for such business activities to make taxable supplies is claimable, subject to the input tax claiming conditions.
Input Tax Incurred for Non-Business Activities
Free Activities
Non-business activities are generally activities of philanthropic, religious, political or patriotic nature for the public domain.
Input tax incurred for non-business activities, such as when you provide services for free, is not claimable.
For example, you may incur input tax for the provision of free talks or free medical services that benefit the public. Such input tax is not claimable.
Subsidised Activities
You may be carrying on both business and non-business activities that will require you to apportion your input tax claims.
This will arise if you provide goods or services in return for a fee that is subsidised by non-business receipts such as grants, donations or sponsorships. Such non-business receipts are usually given to you to fund your operations and support the subsidised activities.
For example, if you are an operator of a nursing home, the government may provide grants to you to subsidise your operating costs so that you could charge lower rates to the low income group. As a result, you will be involved in subsidised activities.
Input tax incurred for subsidised activities is not claimable in full and has to be apportioned.
![To determine the amount of input tax claimable, take the input tax incurred for activities multiply by [Amount charged after subsidy / (Amount charged after subsidy plus Non-business income*)].](/irashome/uploadedImages/IRASHome/GST/Non-business_input_tax_formula.jpg "To determine the amount of input tax claimable, take the input tax incurred for activities multiply by [Amount charged after subsidy / (Amount charged after subsidy plus Non-business income*)].")
*Non-business income comprises non-taxable receipts of donations, sponsorships and grants that fund the activities.
If you face difficulties in attributing the input tax incurred for the various activities (wholly business activities, free activities and subsidised activities) a simpler basis of apportionment is allowed. For details, please refer to GST: Guide For Charities and Non-profit Organisations (696KB).
NEW!Avoid Common Errors made by Charities and Non-Profit Organisations
To help you understand the GST rules and avoid errors commonly made by charities and non-profit organisations (NPOs), please refer to Frequently Asked Questions (577KB).
To help you determine whether you have applied the GST rules correctly, you may use the Self-Review Checklist for Charities and VWOs (483KB) to perform a self-assessment.
If you discover any GST errors, we encourage you to disclose them early for reduced penalties.