Funding topic 9 of 12
GST: contribution, sponsorship or service?
Determine the supply and consideration before choosing a document or tax rate.
Genuine contribution
A genuinely gratuitous contribution with no supply in return is generally outside consideration for a supply. But analyse the entire arrangement, including supplies to beneficiaries funded by the donor and any Schedule I issue. Reporting on utilisation does not automatically create a service; an enforceable training-services contract may do so.
Advertising and acknowledgement
Logo display, advertising rights, product promotion, exclusive sales opportunities or naming rights can change the analysis. CBIC Circular 116/35/2019 concerns acknowledgements in specified individual-donor circumstances; it is not a universal exemption for corporate sponsorship. Examine registration, classification, place of supply, rate, exemption and reverse charge for the particular contract.
Government payments and reimbursement
The statutory treatment of Central or State government subsidies does not mean every government contract payment is outside GST. Price-linked subsidies from other sources can affect value. Reimbursement is not automatically excluded; pure-agent treatment has specific conditions. An invoice paid directly by a donor also needs analysis of who received the supply and whether third-party consideration arises.
Invoices and credits
Issue a tax invoice where legally required for a taxable supply, not merely because money arrived. Use an appropriate acknowledgement for a non-supply contribution. Review input-tax-credit eligibility, invoice recipient, business use, exempt activities and blocked credits; the donor’s CSR credit position and the recipient’s credit position are separate. A utilisation statement is not a substitute for a required tax invoice.
Practical questions
Does a genuine donation need a GST invoice?
Normally an acknowledgement is appropriate if no supply or other charging issue arises. If the arrangement is consideration for a taxable supply, follow invoicing requirements. Receipt of money alone does not settle which document is required.
Read the topic and sourcesDoes displaying the donor logo create GST?
Not automatically in every circumstance. Examine whether there are advertising, sponsorship or promotion obligations. The individual-donor acknowledgement circular has a limited scope; do not extend it mechanically to corporate arrangements.
Read the topic and sourcesIs training free from GST because farmers pay nothing?
Not necessarily. A donor’s payment can be third-party consideration for training supplied to farmers. Check the contract, applicable exemptions, registration, classification and place of supply before pricing or invoicing.
Read the topic and sourcesAre reimbursements outside GST?
No automatic exclusion exists just because a bill says reimbursement. Review the contractual supply and value; pure-agent exclusion requires its specific conditions. Keep proof of whose expense it is and who receives the underlying supply.
Read the topic and sourcesIs every payment from government a subsidy?
No. Government may procure services or goods. Identify whether it is a statutory subsidy, grant, reimbursement or purchase consideration; their GST treatment can differ.
Read the topic and sourcesCan the company claim GST credit on donated equipment?
Review the invoice recipient, ownership and receipt of supply, business use, taxable versus exempt activities, and credit restrictions. The company cannot simply claim tax appearing on an invoice issued to someone else. Donor and beneficiary positions are separate.
Read the topic and sources