GST Applicability on Donations and Contributions for Associations Providing Representational Services

1. Understanding Donations vs. Consideration for Services

Under the GST law, a "supply" involves the exchange of goods or services for consideration. However, if an association receives donations without any direct service provided in return, such donations typically fall outside the scope of GST.

• Genuine Donations (No Supply of Service):): If a contribution is made with no expectation of services or benefits, it is generally considered a donation. For example, if a shrimp feed company contributes funds to the association without any specific services in return, it may qualify as a donation exempt from GST
• Contributions with Quid Pro Quo (Supply of Service): ): If contributions are made to fund specific services, such as representing companies before government authorities, they are viewed as consideration for services and may attract GST. In ABC’s case, contributions for representation before the government on issues affecting members may fall under this category.

2. GST Provisions Relevant to Associations and Contributions

• Section 7 of the CGST Act, 2017 defines "supply" as including all forms of supply of goods or services in exchange for consideration.

• Entry 1 of Schedule II of the CGST Act specifies that activities carried out by a person for another, with or without consideration, can be treated as a supply if there is an underlying intent to provide a benefit or service.

3. Relevant Cases and Rulings

• Case 1: Calcutta Club Limited Case (2019): Established that services by clubs to members, with mutual interest, do not amount to "supply" under GST.
• Case 2: Young Men’s Indian Association vs. Union of India (1970): Highlighted that mutuality doesn’t apply to services provided for consideration.
• Case 3: Lions Club of Poona vs. Union of India (2021): Confirmed that donations without attached benefits are not subject to GST.

4. Conditions for GST Applicability on Contributions and Donations

Associations like ABC can assess their GST liability based on these conditions:

• No Direct Benefit to Donors
• Specific Services Provided
• Threshold for GST Registration

5. Practical Scenarios for ABC

Examples clarifying GST applicability include cases where contributions are made for specific services, which may be taxable, versus general donations, which may not.

6. Compliance Requirements for ABC

If contributions are considered as consideration, registration, charging GST, filing returns, and documentation are necessary for compliance.

7. Conclusion

Associations must understand GST applicability on contributions. Proper documentation and distinguishing between donations and payments for services are essential for compliance.