Query 1

Donation received by Trust

A Charitable Trust receives donations from public. The amount of donations is more than Rs.20 lakhs in a year. Trust uses the amount so received towards its charitable activities including medical and educational help to needy persons. Whether donation received will form part of aggregate turnover and whether trust liable to obtain registration under GST Act?

Reply:- Under GST, a person is liable for registration if it is carrying on business and turnover exceeds the limit of Rs.20 lakhs . The relevant statutory provisions can be noted as under:-

Section 22(1) provides for registration by every supplier in following words.

“22. (1) Every supplier shall be liable to be registered under this Act in the State or

Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.”

Thus, there should be supply of goods or services to make up the aggregate turnover. The meaning of ‘supply’ in section 7 can be noted as under:-

“Section 7(1): For the purposes of this Act, the expression “supply” includes––

1. all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

2. import of services for a consideration whether or not in the course or furtherance of business and

3. the activities specified in Schedule I, made or agreed to be made without a consideration;

4. The activities to be treated as supply of goods or supply of services as referred to in Schedule II.”

It can be seen that the transactions made in the course of or furtherance of business against consideration are covered in the category of ‘supply’ for the purpose of GST Act.

The term ‘business’ is defined in section 2(17)

as under:-

“(17) “business” includes––

1. any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

2. any activity or transaction in connection with or incidental or ancillary to sub- clause (a);

3. any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;

4. supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;

5. provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;

6. admission, for a consideration, of persons to any premises;

7. services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;

8. services provided by a race club by way of totalisator or a licence to book maker in such club ; and

9. any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;”

Thus, the cumulative effect of above provisions is that the receipts should be for supply in course of business. There are number of judgments in which the meaning of ‘business’ is discussed. However, they are not referred here for sake of brevity. The primary thing will be to see whether Trust is engaged in any business activity as per GST Act.

Further, in relation to donations, it is required to be seen whether the donations are against supply of goods or services. Only if such receipts are against supply of goods or services, then only the receipts can be said to be supply and can be included in aggregate turnover. The ordinary meaning of ‘donation’ is very clear that it is voluntary payment by the donor without any expectation of receipt of any goods or services. If the donation is paid against any agreed goods or services like advertisement by

Trust, then it cannot be termed as a donation. It will be consideration for concerned goods or services obtained from the Trust. The meaning of ‘donation’ in dictionary can also be referred to as under:-

“https://dictionary.cambridge.org/

money or goods that are given to help a person or organization, or the act of giving them:

donations of food and money

I’d like to make a small donation in my mother’s name.”

“https://www.dictionary.com/browse/donation

an act or instance of presenting something as a gift, grant, or contribution.

a gift, as to a fund; contribution.”

It can be seen that donation is an act of giving something. It is not in exchange of goods or services. Therefore, such receipts cannot be considered as for supply. The Trust is also not giving any goods or services to the donor.

Similar issue is also dealt with in Flyer issued by CBIC and circular issued by CBIC bearing no.116/35/2019-GST dt.11.10.2019. In this

circular, the issue about receipt of donation against putting name plate is dealt with. While dealing so, it is clarified that such donations which are against promise of putting name plate etc. are not under any obligation or agreement and hence not liable as supply. However, if putting such name etc. amounts to advertisement then the issue about supply will arise. The said principle will apply with more force when the donations are received even without such commitments, in the sense they are blank donations without any corresponding commitment by the Trust.

Therefore, the donations cannot be considered in the aggregate turnover and no liability for registration can arise based on receipt of donations.