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Sponsorship service by charitable institute under GST

Heet Shah 
on 09 December 2019

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The sponsorship service is not defined under the GST Act. So in order to have a clear view, we may refer to the Finance Act,1994. According to 65(99a) of the Act 'Sponsorship' includes naming an event after the sponsor displaying the sponsor's company logo or trading name giving the sponsor exclusive or priority booking rights, sponsoring prizes or trophies for competition but does not includes any financial or other support in the form of donation or gifts, given by the donors subject to condition to provide anything in return to such donor.

Sponsorship service by charitable institute under GST

The sponsorship is a taxable supply and has been mentioned in GST vide Notification.13/2017 CGST (R) dated 28-06-2017 whereby sponsorship has been mentioned as service for which tax liability is to be discharged on a reverse charge basis by body corporate and partnership firms.

The CBIC has clarified the applicability of GST on gift donations received by the charitable organizations involved in the advancement of religion, spirituality or yoga which is acknowledged by them by placing nameplates in the name of the individual donor.

The donor provides financial help/support in the form of donation or gift to institutions The recipient institutions places a name plate or similar such acknowledgment in their premises to express gratitude. The displayed name of the donor is only to express the gratitude and for public recognition of donor's act of charity and not with the intention of giving publicity to the donor in such manner that it would be advertising or promotion. Then it can be said that there is no supply of service for consideration (in the form of a donation). The institute is under no obligation to do anything for the gift or donations received Hence no GST liability arises for such consideration.

 

The point here to be noticed that there is no reference or mention of any business activity of the donor which otherwise would have got advertised. Thus the three conditions are required to be satisfied fo non-leviablity of GST namely:

  • The gift /donation is made to a charitable institution.
  • The payment has the character of Gift or donation
  • The purpose is charity rather than an advertisement.

The following example can be considered as a charitable contribution (not leviable to GST):

  1. 'Donated by Mr. Bajaj in the memory of his beloved grandfather'written on the door or floor of the room or any part of temple which was constructed from such contribution.
  2. 'Good wishes to Mr Ratan for his huge contribution to the orphanage' expressed anywhere in the orphanage to influence the other donors too for contribution.
 

Please note even though the individual's name get promoted in the society but with no intention of commercial benefit is gained in the above-given examples. However in case the same is described as Mr. Bajaj (MD of Bajaj group of Industries) Mr. Ratan (CEO of Tata Group) the same would be considered as sponsorship service provided by institute same would be liable to GST under forward charge since the consideration is not paid by the body corporate or partnership firm.


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