TaxTMI 
TaxTMI 
2018 (12) TMI 590
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....tion is required? At the outset, we would 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 threshol....
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....rsons, as the case may be and a member thereof shall be treated as distinct persons. Such deeming fiction 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 a....
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....arency i.e. the identity between the contributors and the participators of the Association and Foundation. Facts and Background - 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) Entran....
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....s precisely what he has paid.' The Madras, Andhra Pradesh and the Kerala High Courts have held that the test of mutuality does not require that the contributors to the common 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....
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.... (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for 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 s....
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....ply of goods by any unincorporated association. It does not cover supply of services. Unless provision similar to that of deemed sale is made either in the Constitution or the Act, services provided by an association to its members cannot be taxed. c. Invoking the 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....
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....xed u/s 7(1) (a). Earlier in Service Tax regime Court in several cases held that in absence of deeming fiction, treating club/association & its members as distinct person, service tax shall not be payable. Thereafter to nullify the above decision w. e. f. 01.06.2012 clause (a) to Explanation 3 to Sec. 65B provided that an unincorporated association 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 a....
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.... 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." 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 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 va....
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....ities which are to be treated as supply of goods or as supply of services. It states in para 7 that supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of goods. A conjoint reading of the above provisions of the law implies that supply of services by an unincorporated 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....
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.... members in the bonds of friendship, good fellowship and mutual understanding. e) To provide a forum for the open discussion of all matters of public interest; provided, however, that partisan politics and sectarian religion shall not be debated by club members. f) To encourage service-minded people to serve their community without personal financial reward, and to encourage efficiency and promote high ethical 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....
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....y the cabinet treasurer and countersigned by the district governor. Section 2. REMAINING FUNDS. In any fiscal year, any balance remaining in the convention fund after payment of all convention administrative expenses in that year shall remain in said convention fund and become available for future convention expenses and be treated as income in any fiscal year in which expended or otherwise budgeted for payment of such expenses. 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 o....
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.... has to be interpreted in terms of the provisions of the GST Act. Does the applicant club engage in any form of supply of goods or services to its members? Whether the collection of 'fees' from the members is for any supply by the Club to the members? We have seen the earlier submission where the applicant has extensively argued against the applicability of the provisions of the GST Act. A look at the above along with the earlier submission makes us 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 subscri....
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....ctivities of the applicant club in general but there should be no dispute that applicant club does not supply any facilities or benefits in terms of goods or services to its members. At the cost of repetition, we reproduce herein the clauses relating to the use of funds- i) Meeting Expenses ii) Printing of Circulars iii) Stationery iv) Postage v) Greetings vi) Fees payable to International office vii) Fees payable to Multiple office. As can be seen, the club is not formed to provide any supply of goods or services to its members qua the fees received from them. There being no supply qua the fees received, there arises no occasion for us to visit the definition of 'Supply' under the GST Act. The applicant club as per the facts put up before us does not render any 'Supply' for the purposes of the CST Act. Having observed so, we refrain from any further discussion. We find that the Departmental officer holds a different opinion. We would want to deal with one aspect discussed by the official about seminars for Leadership Development as organized for the members. Such activities does not appear to be for transforming members into leaders generally but for the....