GST on Compensation

[Ethirajan Parthasarathy]

It is a common feature for social clubs to pay compensation to members on voluntary surrender of their membership. I would like to know experts’ view whether such compensation received is subject to GST assuming such member is already registered under GST Act.

AI Summary

Compensation for Surrendering Club Memberships Likely Subject to 18% GST, Income Tax Implications Discussed A discussion on a forum revolves around whether compensation paid by social clubs to members who voluntarily surrender their membership is subject to GST. The query initiator explains that clubs may pay such compensation to dormant members to accommodate new members willing to pay higher fees. One expert suggests that this compensation could be considered a supply of service, thus liable for GST at 18%, while another questions the classification of the payment as compensation, suggesting it should not exceed the original membership fee. The discussion also touches on income tax implications, with a consensus leaning towards the GST liability interpretation.