TaxTMI 
TaxTMI 
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.
GST on Compensation
02 Sep 2023 
9 Replies 
1501 Views Asked by
Supply of service: payment for surrender of membership treated as taxable consideration, attracting GST and reporting obligations.
Payment by a social club to a member on voluntary surrender of membership can constitute consideration for relinquishing membership rights and thus a Supply of Service captured by the GST definition of supply and Schedule II (agreeing to refrain from an act), rendering the amount taxable; the member, if a taxable person, would be the supplier required to collect and remit GST, while the club may claim input tax credit subject to conditions. Separately, the receipt may trigger capital gains implications for the member. The precise bye laws and factual characterisation of the admission fee versus refund determine treatment. (AI Summary)
Payment by a social club to a member on voluntary surrender of membership can constitute consideration for relinquishing membership rights and thus a Supply of Service captured by the GST definition of supply and Schedule II (agreeing to refrain from an act), rendering the amount taxable; the member, if a taxable person, would be the supplier required to collect and remit GST, while the club may claim input tax credit subject to conditions. Separately, the receipt may trigger capital gains implications for the member. The precise bye laws and factual characterisation of the admission fee versus refund determine treatment. (AI Summary)