GST on Donation Received by Society: AAR dismisses Application as Assessee not involved in Supply of Goods or Services [Read Order]

The Authority Of Advance Rulings ( AAR ) in Karnataka Goods And Service Tax, has recently dismissed an application filed before it on the grounds of the said application being disqualified in terms of Section 97 read with Section 95(a) and Section 7(1) of the CGST  Act.

The dismissal of the aforesaid application resulted when the applicant, M/s. Mercara Downs Golf Club, a society registered under the Karnataka Society Registration Act, at Madikeri, on receiving a donation of Rs.1 Crore during the year 2021-22 from a person not being a member of their club, filed an application for advance ruling, before the authority.

The donation being received with natural love and affection towards Golf, and without any consideration or publicity involved in the form of Advertising and Promotion of business, the applicant has sought advance ruling in respect of the questions as to whether such donation amount would be taxable under GST or not, and if so taxable whether the rate of GST so applicable, would be 18% or not.

The applicant placing its reliance on the ruling of the AAR, Maharashtra in M/s Jayashankar Gramin V.s Adivasi Vikas Sanstha, the Karnataka AAR, referring to Section 97, Section 95(a) and Section 7(l) of the CGST Act while rejecting the said application of the applicant, thus observed:

“It is evident from the above provisions that advance ruling can be sought under Section 97 only for supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Supply, as per Section 7(1), includes all forms of supply of goods or services or both, made or agreed to be made for a consideration by the applicant in the course or furtherance of business.

In the instant case the applicant admittedly is not involved in supply nor intends to supply any goods or services or both to the donor and thus the first limb of the Section 7(1) supra is not fulfilled. Also, admittedly there is no quid pro quo involved to treat the amount as consideration and there is no business relationship between the donor and the applicant and hence the receipt of donation is not towards any supply.

Thus, from the facts brought forth in the application for advance ruling, the applicant admittedly is neither undertaking nor proposed to undertake any supply of goods or services or both to the donor in respect of the donation received and thus there is no supply in terms of Section 7(1) of the CGST Act 2017.

 Hence, the instant application does not qualify as an application for advance ruling in terms of Section 97 read with Section 95(a) and Section 7(1) of the act, ibid, and is liable for rejection in terms of Section 98(2) of the CGST Act.”

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