Rotary organization membership fees constitute taxable supply under GST despite charitable purposes, AAR rules

AAR Tamil Nadu ruled that activities performed by a rotary organization to its members for membership fees constitute taxable supply under GST. The authority held that despite charitable purposes, the organization and its members are deemed separate persons, making membership fee collection a taxable service requiring registration under CGST Act 2017. However, AAR declined to rule on specific charitable activities as they pertained to completed previous years beyond Section 95 scope, and did not address GST liability on other collected amounts due to insufficient details provided by the applicant.

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Issues Involved:
1. Requirement of GST registration for the applicant.
2. Taxability of membership fees collected by the applicant.
3. Manner of determining the liability to pay tax on goods or services provided by the applicant.

Detailed Analysis:

1. Requirement of GST Registration:

The applicant, Rotary District 3231, argued that the amounts collected are solely for charity and humanitarian activities without any profit motive and thus do not constitute a business. They referenced the definition of "persons" under Section 2(84) of the CGST Act, 2017, asserting there is no deeming fiction to treat associations and members as different persons. Therefore, they claimed the key condition for taxing a transaction under Section 7(1)(a) is not satisfied.

However, the judgment highlighted that under Section 7 of the CGST Act, 2017, "supply" includes activities made for consideration in the course or furtherance of business. The definition of "business" under Section 2(17) includes the provision of facilities or benefits by an association to its members for a subscription or other consideration. Hence, activities like organizing events and seminars for members are considered business activities. Consequently, if the membership fees collected exceed the threshold limit, registration under GST is required.

2. Taxability of Membership Fees:

The applicant contended that the membership fees collected should not be taxed as the association and its members are not distinct persons. However, the judgment referenced the amended Section 7(1)(aa) effective from 01.01.2022, which clarifies that activities by an association to its members for consideration are deemed to be supplies. The explanation provided states that the association and its members are considered separate persons, and the supply of activities between them is taxable.

Thus, the membership fees collected by the applicant from its members are considered taxable supplies under Section 7(1)(aa) of the CGST Act, 2017. As such, the applicant is required to register under the GST Act and pay applicable GST on these fees.

3. Determination of Tax Liability:

The applicant did not furnish detailed documents regarding the amounts collected and the specific activities undertaken. The judgment noted that the applicant's activities, such as seminars and service projects, were already completed in previous years (2017-18 and 2018-19). Under Section 95 of the CGST Act, 2017, advance rulings can only be provided for activities being undertaken or proposed to be undertaken. Since the activities in question were already completed, the authority could not extend a ruling on them.

The judgment concluded that the specific activities listed by the applicant pertain to past years and are beyond the scope of Section 95(a) of the Act. Therefore, no ruling was provided on these activities. Additionally, due to the lack of details on other amounts collected, no ruling was extended regarding their GST liability.

Ruling:

1. The applicant is required to register under the GST Act as they are providing taxable supplies.
2. The membership fees collected by the applicant are taxable under Section 7(1)(aa) of the CGST/TNGST Act, 2017.
3. No ruling is extended on other amounts collected due to insufficient details, and no ruling is provided for activities already completed in previous years.

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