Membership fees deemed taxable as supply of services under GST Act

The authority ruled that the amounts collected as membership subscription and admission fees from members by the applicant club are considered as a supply of services under GST. The authority found that the club and its members are distinct persons, and the fees received are considered as consideration for the supply of goods/services. The principle of mutuality was deemed inapplicable following an amendment to the GST Act, settling the issue. The activities provided to members were classified as services falling within the definition of "business," making the amounts received taxable as a supply of services.

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Issues Involved:

1. Whether the amounts collected as membership subscription and admission fees from members by the applicant club can be considered as supply of services under GST.

Detailed Analysis:

Issue 1: Whether the amounts collected as membership subscription and admission fees from members by the applicant club can be considered as supply of services under GSTRs.

Applicant's Contentions:

1. The applicant club is affiliated with Rotary International, an organization aimed at providing humanitarian services and promoting goodwill and peace. The club receives fees from its members to defray expenses related to meetings, communication, Rotary International dues, and other administrative costs. These activities are conducted on the principle of mutuality, meaning the funds are used for the mutual benefit of the members (Paragraph 2.2).

2. According to the applicant, the transactions between the club and its members do not constitute a supply under Section 7 of the CGST Act, 2017, as there is no furtherance of business or rendering of services. The applicant argues that since the association and its members are not treated as different persons under Section 2(84) of the CGST Act, the key condition for taxing a transaction under Section 7(1)(a) is not satisfied (Paragraph 2.3).

3. The applicant also cited a previous ruling by the Hon’ble AAAR Maharashtra, which held that amounts collected as membership subscription and admission fees from members are not liable to GST as a supply of services (Paragraph 2.4).

Officer's Contentions:

1. The officer noted that the club collects separate funds for administrative and fellowship expenses, which are used to provide facilities to members, such as meetings and social gatherings. These activities facilitate personality development and other benefits for members, which indirectly support the club's main objective (Paragraph 3.1).

2. Under Section 2(17)(e) of the GST Act, the term “business” includes the provision of facilities or benefits to members by a club, association, or society for a subscription or other consideration. Therefore, the officer contended that the applicant is conducting “business” as defined under the GST Act, and the subscription and fellowship dues should be considered as consideration for the supply of services (Paragraph 3.2).

3. The officer further argued that the activities undertaken by the applicant do not conform entirely to the definition of charitable activities and should be treated as a business under Section 2(17)(a) of the GST Act. Hence, the subscription and fellowship dues are taxable as a supply of services (Paragraph 3.3).

4. The officer referenced an amendment to Section 7 of the CGST Act, 2017, which clarified that activities or transactions between a person and its members are considered a supply of goods/services, thereby deeming the club and its members as separate entities for GST purposes (Paragraph 3.5).

Authority's Findings:

1. The authority examined the definition of “supply” under Section 7 of the CGST Act, 2017, and noted the amendment that included activities or transactions between a person and its members as a supply of goods/services. This amendment received the President's assent on March 28, 2021, settling the issue of mutuality in such cases (Paragraphs 5.5-5.8).

2. Under Section 2(84) of the CGST Act, the term “person” includes an association of persons or a body of individuals. Therefore, the applicant club and its members are distinct persons, and the fees received by the applicant are considered as consideration for the supply of goods/services (Paragraphs 5.9-5.10).

3. The authority held that the contributions from members for meetings and administrative expenses amount to a supply under the GST Act. The principle of mutuality is not applicable after the amendment to Section 7 of the CGST Act, 2017 (Paragraphs 5.11-5.12).

4. The authority also referenced Section 2(102) of the CGST Act, which defines “services” to include activities other than goods, money, and securities. The activities performed by the applicant for its members, such as meetings with refreshments, are considered services under this definition (Paragraphs 5.13-5.14).

5. The authority concluded that the applicant's activities fall under the definition of “business” in Section 2(17)(e) of the CGST Act, as they involve providing facilities or benefits to members for a subscription. Therefore, the amounts received from members are taxable as a supply of services (Paragraphs 5.15-5.18).

Order:

The authority ruled that the amounts collected as membership subscription and admission fees from members by the applicant club are considered as supply of services under GST (Paragraph 6).

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