AAR rejects advance ruling on GST applicability for donations citing no supply under Section 7(1) CGST Act 2017

AAR Karnataka rejected advance ruling application regarding GST applicability on donations. The Authority held that advance rulings under Section 97 can only be sought for supply of goods or services undertaken or proposed by the applicant. Since the applicant neither supplied nor intended to supply goods/services to donors, and donations involved no quid pro quo or business relationship, there was no "supply" under Section 7(1) CGST Act 2017. The application was deemed inadmissible and rejected under Section 98(2) CGST Act 2017.

---

---

Issues:
1. Whether a donation received by a golf club is taxable under GSTRs.
2. If taxable, what is the applicable GST rate on the donationRs.

Analysis:

Issue 1: Taxability of Donation under GST
The applicant, a century-old golf club, received a donation of Rs.1 Crore from a non-member without any consideration or publicity for the donor's business. The applicant contended that the donation was out of natural love and affection towards golf, not aimed at advertising or promotion, and thus not taxable under GST. The Assistant Commissioner opined that the donation could be considered a supply, as it could be for future services, and hence taxable. The applicant relied on a ruling involving a charitable trust, but the authorities found it not relevant as the applicant was not a charitable trust. The authorities noted that there was no quid pro quo or supply involved in the donation, leading to the conclusion that the donation was not towards any supply, making it not taxable under GST.

Issue 2: Applicable GST Rate
The applicant sought clarification on the applicable GST rate if the donation was taxable. However, since the authorities ruled that the donation was not taxable under GST, the question of the applicable GST rate did not arise.

The ruling authority emphasized that advance ruling can only be sought for matters related to the supply of goods or services in the course of business. As the applicant was not involved in any supply to the donor and there was no consideration or business relationship, the donation did not qualify as a supply under the CGST Act 2017. Therefore, the application was deemed inadmissible and rejected under the first proviso to Section 98(2) of the CGST Act 2017.

---