TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 590
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.... like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS : 1) Lions Clubs is an International organization having clubs in 210 countries engaged in humanitarian and charitable services. 2) These services are executed through various districts comprising of many Clubs. 3) In order to facilitate the meetings and administration fees are collected from members. 4) These amounts are then used for administration and meetings. 5) In some cases the amount so collected is likely to exceed Rs. 20 lacs, being the threshold for registration under GST Act, 2017. Clarification....
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....on is not provided under the current GST regime. WRITTEN SUBMISSION MADE BY applicant at the time of hearing on 08/08/2018 --- ISSUE UNDER CONSIDERATION:- Lion Clubs are autonomous units those collect fees from their members in order to meet their administrative costs. Similarly Lions Districts collect fees from Clubs and Cabinet Members to manage District activities. Lion Clubs and Lions District (assemblage of individual clubs area wise) are proposing to levy GST as per CGST/MGST ACT 2017, on the member's fees if they cross the threshold limit as applicable. It is felt that under the principal of mutuality and since the fees so collected are only pooled together for convenience and for defraying meeting expenses and Administrative expenses should not be brought under the purview of GST. HISTORY & PRESENT STATUS- India is the second largest community and the fastest growing community of Lions Clubs volunteers in the world. Lions Clubs established its presence in India in 1956 and today has members across 6,400 Clubs. Lions volunteers reach Out to help anywhere across the country, even in the remotest locations. From providing instant assistance during sudden disasters suc....
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....d - 1. The International Association of Lions Clubs also known as Lions Clubs International (LCI) is a non-profit making organization registered in Ilions, United States of America (USA) and has many members all over the globe. 2. Lions Club International Foundation (LCIF), charitable grant making arm of LCI is also a non-profit making charity organization registered in the State of Ilinois USA. 3. LCI pursues its charitable objective through LCIF in multifarious ways by building / running hospitals, clinics, schools, playgrounds, etc. other health care, charitable activities. 4. LCI and all its member clubs are required to maintain two separate bank accounts, one for administrative expenses and other for donations / charity. The receipts in donation/ Charity account are used exclusively for the purpose of donation / charity and no amount is utilized for administration purposes. The receipts in LC administrative account are majorly comprised of the following: Receipts from Indian Member clubs (i) Annual membership fees, (ii) Entrance fees from new member clubs. (iii) Bank Interest Expenses are generally in the form of: - i) Meeting Expenses ii) Printing of Circula....
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....n fund should willy-nilly distribute the surplus amongst themselves : it is enough if they have a right of disposal over the surplus, and in exercise of that right they may agree that on winding up the surplus will be transferred to a similar association or used for some charitable objects." SUPPLY:- As per Sec. 9 of the Central Goods & Services Tax ("CGST") Act, 2017, levy of tax is on an event called 'supply', Scope of supply is stated u/s 7. Relevant portion of said provision is reproduced below for ready reference: 'Sec. 7. (1) For the purposes of this Act, the expression "supply" includes-- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration' To tax the transaction between an association or club and its members, said transaction must either fit either under clause (a) or clause (c) above. Clause (a) covers all forms of supply of goods or services or both such as sale, transfer, barter, exchange, lice....
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....the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied; Conjoint reading of both the definitions provides that where a consideration is involved in a transaction, the recipient is the "person" who pays the consideration to the "supplier". Hence two different persons have been envisaged in the law to tax a transaction as a supply made for a consideration. Now the question remains that whether the club and its members can be treated as different persons? Recent Circular:- "GST is levied on intra-State and inter-State supply of goods and services. According to section 7 of CGST Act, 2017, the expression "supply" includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, and includes activities specified in Schedule II to the CGST Act, 2017, definition of....
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....e concept of "deemed sale" shall result in countless litigations. This is because Schedule - II of the CGST Act, 2017 is at any many places in direct conflict with Article 366(29A). Hence the said circular will open Pandora's Box full of litigation. Now, let us examine whether the transaction between an association and its members can be taxed u/s 7(1)(c). Said clause covers the activities specified in Schedule l, made or agreed to be without a consideration. If self-supply is taxable, it must be covered under Schedule I. Entry number 2 of Schedule I provides that supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance oi business shall be taxable. Members are not Covered under section 25 as distinct person. Hence only thing to be checked is whether an association and its members are related person. Explanation u/s 15 of CGST Act, 2017 defines related person. Said explanation is also reproduced below for ready reference: Explanation.- For the purposes of this Act,-- (a) persons shall be deemed to be "related persons" if-- (i) such persons are officers or directors of one anot....
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....ociation or body of persons, as the cast may be and a member thereof shall be treated as distinct persons. Such deeming fiction is not provided under the current GST regime. Further, the said transaction between the club and its members also does not fits into the definition of "Supply" owing to the different limbs of the definition i.e. "business" & "consideration" as elaborated above. So it is prayed that, Subscription received from members or cabinet should not be subjected to GST as it is a contribution towards common expenditure to conduct the meeting etc. and because no facilities or benefits are being provided out of this subscription. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- M/s. Lions Club of Poona, Kothrud, has submitted the letter bearing date 29-05-18 addressed to the Advance Ruling Authority, Mumbai, under which they have applied for advance ruling under ARA-01. The said application has been examined by this office. In this regard views of this office against Sr. No. 14 & 16, are as under: Para no. 14 : The question(s) on which advance ruling is required. "Since the amount collected by individual....
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....ces are rendered nor any goods are being traded. Consequentially, a prayer that there is no registration is required, has no leverage and legal backing. Para No. 16 Statement containing the applicant's interpretation of law and or facts, as the case may be, in respect of the aforesaid questions. As the activity is more appropriately covered, as explained above, under "scope of supply", Applicant's plea is not acceptable as the same is not supported by the statutory provision. Also the term "person" is defined in section 2(84) of the CGST Act, 2017 to include an association of persons or a body of individuals, whether incorporated or not, in India or outside India. This definition also is sufficient enough to cover the activity of the Applicant under the GST regime. It is pertinent to mention here that the various case laws on the above issue; are in respect of the provisions of the Finance Act, 1994; which existed prior to and hence not relevant during the GST regime. Additional submissions on 07.08.2018 The Applicant in this case had earlier filed copy of GST ARA-1 on 31-5-18 and as per the request made by the Applicant, the extension was granted to them to file additiona....
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....d association or body of persons (AOP) to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of services." Therefore, the above said circular is irrelevant and inapplicable in the present situation. Hence the instructions in the said circular claimed to be applicable to them by applicant, is incorrect. Para No. 5 - It is also submitted that the Applicant have nowhere expressly submitted and committed that they are not engaged in the activities which may amount to '(facilities" or "benefits" to its members. This is very much essential to decide whether the Applicant falls in/out of purview of the definition under "business", as envisaged under section 2(17) of CGST Act, 2017. On the contrary, the written submission States that the Seminars and Institutes for Leadership Development and other forums only for Lion members and non lions are not allowed to take part. Thus, funds received from members are utilized for mutual benefit of members" / last para of page no. 2 refers). Para No. 6 - Therefore, there is no force in the submission of the Applicant that there is no furtherance of business in the activity and neither any services....
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....thical standards in commerce, industry, professions, public works and private endeavors. Article XII -Club Funds Section 1. PUBLIC (ACTIVITY) FUNDS.- All funds raised from the public must be returned to public use, including money accumulated from invested public funds. The only deductions that may be made from the activity account are the direct operating expenses of the fund raising activity. Money accumulated from interest must also be returned to public use. Section 2. ADMINISTRATIVE FUNDS.- Administrative funds are supported through contributions from members through dues, fines and other individual contributions. As per the Standard District constitution of the clubs, the fallowing purposes are, Article II - Purposes, The purposes of this district shall be: a) To provide an administrative structure with which to advance the Purposes of Lions Clubs International in this district. b) To create and foster a spirit of understanding among the people of the world. c) To promote the principles of good government and good citizenship. d) To take an active interest in the civic, cultural, social and moral welfare of the community. e) To unite the members in the bon....
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....es. Section 3, FEE COLLECTION. Such fee as the district governor shall set may be collected, under procedures set by the district governor, from each delegate, alternate, and guest attending the district convention to defray the actual cost of convention meals and entertainment. Article VIII -DISTRICT ADMINISTRATION FUND Section 1. DISTRICT REVENUE. To provide revenue for approved district projects and to defray the administrative expenses of the district, an annual district administrative fund tax of (set out value in national currency ___) is hereby levied upon each member of each club in the district and shall be collected and paid in advance by each club in two (2) semi-annual payments as follows: value in national currency___) per club member on September tenth of each year to cover the semi-annual period July 1 to December 31; and (value in national currency __) per club member on March tenth of each year, to cover the semi-annual period January 1 to June 30, with billings of the same to be based upon the roster of each club as of the first days of July and January, respectively. Said tax shall be paid to the cabinet secretary or cabinet treasurer (or secretary-treasurer)....
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....s observe that the question put forth for our consideration would have to be answered in the negative. We proceed to record our reasons. We restrict our discussion herein below to the activities of the applicant in relation to its members qua the receipt of fees from them. We are not called upon to discuss the activities of the applicant in general. The definition of business for the purposes of the GST Act reads thus- Section 2 -Definitions (17) "business" includes- (a) ....................................; (b) ....................................; (c) ....................................; (d) ....................................; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) ....................................; (g) ....................................; (h) ....................................; and (i) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and"; [this clause is substituted for the earlier clause by the Central Goods and Services Tax (Amendment) Act,....