NGOs and schools in Bengaluru question GST notices on UPI payment data

Time of India

23-07-2025

Bengaluru: Trade bodies Wednesday welcomed the state govt's assurance that it would not pursue tax notices issued over the past 2-3 years for arrears on exempted goods and services, but the move failed to enthuse many as fears of a backlash remain.
"Why should we sit and explain to the tax officials who have recklessly issued notices to us?" a person asked. Many pointed out that tax demand notices were also issued to orphanages for the donations they received and to educational institutions over charges for extra-curricular activities such as conducting karate classes.
TOI looks at two instances that raised the concerns of the stakeholders.
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We are doing service: NGO
A Bengaluru-based NGO that has been serving orphaned children for over 82 years received a GST notice asking for its transaction details for the past three years.
The notice shocked the social service organisation, which insisted it is an end-user, not a business entity, and therefore not liable under GST.
"I received the notice about 10 days ago," said a representative of the NGO, who requested that both his and the organisation's names not be disclosed. "The officials even visited our organisation, saw what kind of work we are doing and despite that, they issued the notice."
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The NGO, located in South Bengaluru, which functions on donations, has now been asked to submit transaction records for three financial years. The representative confirmed that the notice was based on UPI and RTGS payments received by the NGO. He stressed that the organisation is not involved in any business activities. "We are an end user. Whatever purchases we make in the market, we pay tax on them. We don't claim input tax credit.
There is no question of evasion. We are income tax payers and have always followed all rules."
The representative said: "I am an entrepreneur. But I work here on an honorary basis. When I saw the notice, I was surprised. As an entrepreneur, I didn't find any mistake in what we're doing. At the very least, the officials should check the organisation's website to see what work is being done. But they didn't bother. They just issue notices left and right."
The representative said he has already replied to the notice. "I have given a reply explaining everything. I don't know if they will now ask for books of accounts. If they do, I may have to go and submit those too. But this is harassment. We are doing free service."
He questioned the very basis of the notice. "From 1942 till now, there was never any sales tax for us. After GST came into force in 2017, there was no notice either...
Suddenly we get this now."
He believes this kind of scrutiny demoralises donors and volunteers. "These kinds of things discourage people from donating. We don't sell anything. We don't do business. We are a direct consumer, not a B2B entity. Still, they treat us like a business."
School: Why tax notice for co-curricular activities?
A private school in Mysuru has found itself grappling with a GST notice which the institution authorities say misinterprets charges collected for co-curricular activities.
"We've always known that GST applies to uniforms, books, and similar supplies. But now, they're questioning us over karate fees and other co-curricular activities that are part of the academic syllabus," said the institution secretary and member of an association of schools.
He said the school received a notice three months ago, following which they submitted all audit reports and a detailed explanation. "There's a standard format in which they asked for documents, and we complied.
But since then, there's been no further communication," he added.
The secretary explained that the school treats sports, karate, and other similar sessions as part of the academic curriculum, not as separate services. "If such training is conducted independently, the trainer may come under GST. But in our case, these activities are integrated with schooling. Unfortunately, even when education is exempt, GST seems to be added in the back end."
"The tax treatment of school-related services remains inconsistent. Some aspects of the GST policy are fair, others create confusion. Co-curricular activities like sports, and transportation should not be taxed when they are linked to regular schooling," he added, urging the authorities to issue clearer guidelines.