service tax on membership fee

[Satbir singh wahi]

A Society for welfare of employees is receiving membership fee. Amount of fee is received for three years in advance. Whether this fees is to be bifurcated into 3 years for calculating basic exemption of 10 lacs.If it receives ₹ 27 lacs in first year (for three years membership) , whether service tax applicable or we can bifurcate to three years and avail basic exemption.

[Tarun Agarwalla]

Dear sir

please see to the fact that of the case that the society may be regarded as trade union. if it is so specific exemption vide mega exemption notification can cover your case no 25/2012.

coming to your query it is important that how the accounting of the membership fees is being done is more important. if the fees is recognized within 3 years then in service tax also the similar process to be taken.

thanks

CA. Tarun

[Manoj Agarwal]

Dear Sir,

In my view, if you have received ₹ 27 lacs in 1st year (as advance consideration for 3 years), the point of taxation is the date of advance (Rule 3 of POTR, 2011) and service tax is payable thereon in the 1st year itself and such receipt cannot be bifurcated into 3 years irrespective of accounting treatment of such receipt.

[bhart b sharma]

it appears to be covered under 'Membership of Club or Association Services'; Section 65(105)(zzze) of Finance Act, 1994. the meaning of 'club or association' is provided under Section 65(25aa) of the Act.

from your querry, it is not clear as to what is the nature of activity undertaken by the association/society.

there is Valuation angle, covered by Valuation Rules of Service Tax

also, there is question of SSI exemption of 10 lakhs.

further, it involves Point of TAxation and "Place of Provision" Rules as well.

[Satbir singh wahi]

A Society is for welfare of employees, doing activities like seminar , proposed housing projects etc, meetings etc. The menbership fee received during the year is ₹ 27 Lacs for three years . Now whether Service tax applicable .

[Tarun Agarwalla]

Dear Sir

your case seems to be covered as a trade union as it is for the employees and their benefits. if it is so then your case is covered under mega exemption notification no 25/2012 and hence not taxable

[Satbir singh wahi]

Sir

Only registered as society not registered as trade union .

[KASTURI SETHI]

I agree with Sh.Manoj Agarwal with his opinion dated 18.8.2015.

AI Summary

Point of taxation: advance membership fees are taxable on receipt under POTR, subject to exemption if entity qualifies.
Advance membership fees for an employees' welfare society are generally taxable as Membership of Club or Association Services and, under the Point of Taxation Rules, are taxable on receipt; entitlement to a trade-union exemption depends on the society's character and registration, affecting whether the advance receipt may be exempt rather than taxable when received.