Google provides a service, but they also require everyone to use their service. There is no realistic alternative if you want to reach the 70% of the market Google controls. Sure, F-Droid and sideloading and whatever exist, but realistically they are so crippled by unnecessary restrictions imposed on them by Google that they aren't serious options.

So now Google is in a position where they can place unreasonable rules on their service and no one can do anything about it. So, naturally, that's what they are doing. You can argue it's their right to put whatever restrictions they want on "their" service. But we can still argue that their restrictions are unfair.

This rule in this case seems unfair. The cost to Google to distribute this app is vanishingly small, probably on the order of cents. The benefit Google gains from exerting total control over the availability of apps on Android is quite large. It seems like Google is already getting the better end of the deal, and saying "you are not permitted to ask for donations to support your free art project unless you give us a 30% cut" just seems petty.

Can Google do it? Sure, they have the right. Is it fair? In my opinion, no. Being legal doesn't make it fair.