AAAR overturns AAR ruling on club services taxability due to natural justice violations and improper retrospective amendment application

The AAAR set aside the AAR's ruling on club and association services taxability, finding violations of natural justice. The AAR had based its decision on a retrospective amendment that was not operational when the ruling was pronounced on 27.09.2021, as the amendment only came into force on 1.1.2022. Additionally, different AAR members decided the case than those who heard it, violating natural justice principles. The matter was remanded to AAR for fresh consideration of the application regarding mutuality principle and taxability of services like accommodation, restaurant, and recreational facilities provided to members.

---

---

Issues Involved:
1. Whether the services provided by the club to its members are taxable under GST.
2. Whether the delay in filing the appeal should be condoned.
3. Whether the ruling by the Authority for Advance Ruling (AAR) was legally sustainable.

Summary:

Issue 1: Taxability of Services Provided by the Club
The appellant, M/s Umed Club, sought an Advance Ruling to determine if the services such as short-term accommodation, restaurant, and recreational services provided to its members are taxable under GST. The AAR, Rajasthan, in its Order dated 27.09.2021, concluded that these services are taxable as per clause (aa) of sub-Section (1) of Section 7 of the CGST Act, 2017, effective from July 1, 2017. The appellant contended that based on the Hon'ble Supreme Court's judgment in the case of State of West Bengal VS Calcutta Club Limited, services provided by incorporated clubs to their members were not taxable under the erstwhile service tax regime and argued that the same should apply under the GST regime. They also pointed out that the definition of "person" under Section 2(84) of the CGST Act, 2017, is identical to that in the service tax regime, implying that the same interpretation should apply.

Issue 2: Delay in Filing the Appeal
The appellant filed the appeal on 20.11.2021, beyond the stipulated 30-day period, citing the suo-moto extension of the limitation period by the Hon'ble Supreme Court in Miscellaneous Application No 665 of 2021. The Supreme Court had extended the limitation period from 15.03.2020 to 28.02.2022 due to the COVID-19 pandemic, which the appellant argued should justify the delay.

Issue 3: Legal Sustainability of the AAR Ruling
The appellant argued that the AAR's ruling was legally unsustainable for multiple reasons:
- The decision was pronounced after a delay of almost one and a half years, whereas it should have been within 90 days as per Section 98(6) of the CGST Act, 2017.
- The members who heard the case were different from those who pronounced the decision, violating the principles of natural justice.
- The AAR relied on a retrospective amendment introduced by the Finance Act, 2021, which was not operational at the time of the ruling. This amendment was notified to be effective from 1.1.2022, whereas the ruling was pronounced on 27.09.2021.

Conclusion:
The Appellate Authority for Advance Ruling, Rajasthan, noted the extension of the limitation period by the Supreme Court and accepted the delay in filing the appeal. It also acknowledged the appellant's contention regarding the retrospective amendment and the change in the AAR members who heard and decided the case. Consequently, the ruling of the AAR, Rajasthan, dated 27.09.2021, was set aside, and the matter was remanded back to the AAR for a de-novo decision, taking into account all the contentions of the appellant.

---