AI Drafter 
TaxTMI 
TaxTMI 
2018 (12) TMI 1086
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..... 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 RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) RAISED: FACTS: 1. The Applicant, Banking Codes& Services Board of India is a Society registered under the Societies Registration Act, 1860 and is also registered as a "Public Trust" under the Maharashtra Public Trust Act, 1950. The Applicant Board was formed in the year 2006 by the Reserve Bank of India (RBI) in pursuance of the Report of the Taraporewala Committee for the purpose of creating awareness and ensuring the correct following of the Codes and Standards for Services by the Banks in India. For the first 5 years i.e. from 2006 to 2011, it was fully funded by the Reserve Bank of India and the Applicant started to raise it....
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....V/ Radio, hoardings or any other mode which the Society may deem fit. vii. To take up specific assignments, if any, in the areas coming under the Society's objects as projects, turnkey solutions or on any other terms of contracts with in-house resources or with the participation of outside agencies in order to fully implement the Code. viii. To organize teaching and training courses, conferences, seminars, lectures and similar other activities relating to the Codes and Standards or implementation of the said Codes and Standards. ix. To publish journals, reports, pamphlets, books, booklets, research papers in furtherance of the objects of the Society. x. To maintain close contacts with Indian Banks' Association, other similar institutions, Boards & organizations having similar objects or allied objects by way of subscription, enrolment as a member thereof, financial or other kind of assistance, collaboration, cooperation and in any manner as the Society may deem fit. xi. To initiate, establish and participate in collaborative activities with other institutions/ organizations having similar objects within and outside the country. 3. The Applicant raises annual invoi....
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....isposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as - (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a ....
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.... (h) services provided by a race club by way of totalisator or a licence to book maker in such club; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;" A sum total of the analysis of the terms 'Supply", "Consideration" and "Business" would make it clear that the activity of the Applicant does not fall under either of them, as discussed herein under: SUPPLY: It is clear from the definition of 'Supply' that firstly the same involves all forms of supply of goods or services. In this regard, there is no question of any goods in this case. As such, it is to be seen whether any service is provided by the Applicant. As already stated above, applicant is collecting Corpus Fund from Member Banks and the entire activity is related to public awareness about the codes & standards followed by member Banks. This entire activity, including the salaries of the staff is paid only through the interest earned at present from the Corpus Fund, which is capitalized. There is no facility or benefit of any kind offered by the Applicant to Member Banks for their c....
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....tered as a 'Charitable Institute' and there is no activity such as a 'Supply' or 'business' carried out by them, as discussed above. However, even in cases, where Clubs and Associations have collected subscriptions from their members and have provided facilities to such members, various High Courts and Tribunals have held such activities not eligible to Tax on the Principle of Mutuality. Principle of Mutuality is guided by the gospel that "No man can trade with himself; he cannot make, in what is its true sense or meaning, taxable profit by dealing with himself". Mutuality principle offers a tax shelter, as long as its character of a mutual association is retained, with its income not tainted by commerciality. A formal organization indicating mutuality as between members with bye-laws spelling out mutuality may, however, be necessary as proof of claim to mutuality either as a society or a company registered under Section 25 of the Companies Act, 1956, or even as managed by a public trust, with such activities primarily intended to be confined to its members. What is Principle of Mutuality? Often, we come across situations where a group of people forms an association (could....
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....IT A-1 to A-3). 2012 (26) S.T.R. 401 (Jhar.) = 2012 (6) TMI 636 - JHARKHAND HIGH COURT IN THE HIGH COURT OF IHARKHAND AT RANCHI, Prakash Tatia. CJ. and Aparesh Kumar Singh. J. RANCHI CLUB LTD. Versus CHIEF COMMR. OF C. EX. & S.T.. RANCHI ZONE W.P. (T) No. 2388 of 2007, decided on 15-3-2012 Club - Incorporated as Company and formed on principle of mutuality - Liability to Service tax for services utilised by members of club, viz. mandap keeper, etc. - HELD : In view of mutuality, if club provides any service to its members, it is not a service by one legal entity to another, and is not liable to Service tax - Explanation to Section 65 of Finance Act, 1994 that 'taxable service includes any taxable service provided or to be provided by any unincorporated association or body or persons to a member', found to be similar to Explanation-I to Section 2(n) of Madras General Sales Tax Act, 1959 including within definition of sale any transfer of property by club to its members, considering which Apex Court in Young Men's Indian Association [1970 (1) SCC 462] had held supply of preparations by club to its members was not a sale as there was no transfer of property from one to ano....
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....n - Programmes not covered under commercial training or coaching - Appellant not covered under relevant service - Sections 65(26), 65(27) and 73 of Finance Act, 1994. [paras 4.5, 4.7, 4.10] Club or Association service - Receipts without return - Member not entitled to any specific service in return - Institutions also become members - Membership fee to be paid without expecting any return - Revenue not brought out the services or advantages received by members on paying fees or other amount - Service tax not leviable on amounts received from members, member-institutions and trade - Sections 65(25a) and 73 of Finance Act, 1994. [paras 4.11, 4.12] Convention service - Commercial concern - Service tax liability attracted only if Convention service rendered by commercial concern prior to 1-5-2006 - Impugned demand pertaining to period prior to 1-5-2006 - Appellant held as not a commercial concern while holding non-liability under Commercial Training or Coaching service - Demand not sustainable under Convention service for impugned period - Sections 65(32) and 73 of Finance Act, 1994. [para 4.13] Appeal allowed The Tamilnadu Sales Tax Tribunal in Cosmopolitan Club V. State (....
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....l cases of taxation under various Statutes such as Income tax, VAT/ Sales Tax and Service Tax the various High Courts and Tribunals have held that no tax is leviable on services provided by Associations and Clubs to its own Members out of the subscription collected, on the Principles of Mutuality. The above facts, therefore, support the contention of the Applicant Board that they are not liable to Goods and Services Tax. Additional Submission in Advance Ruling Application for "Banking Codes And Standards Board of India" We are thankful for the patient hearing given on 25-04-2018. Our Clients have made submissions in their Advance Ruling Application pertaining to their activity i.e. collecting Membership Fees from all its Member Banks, which is neither falling under the definition of "Supply" nor under "Consideration" or under the definition or "Business" as provided under CGST Act, 2017, as explained in detail during the said hearing dated 25-04-2018. To elaborate the said legal provisions along with the factual matrix pertaining to our Clients "Banking Codes and Standards Board of India" (hereinafter referred to as "BCSBI" for the sake of brevity), as desired, we make the....
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....anks". The Applicant issues advise of "Annual Membership Fee" to the Member Banks. Para 1 & Para 2 of the Letter written to Bank, is reproduced as under: "1. As yon may be aware, the funding support from RBI which available to BCSBI since its inception has ceased from 2016-17 as per arrangement agreed earlier. Accordingly, from the year 2016-17, BCSBI has to be self sufficient for meeting its expenses. We are pleased to inform you that with co-operation front all its Members, BCSBI has been able to meet all its expenses out of its own income since last two years. 2. In terms of Rule 5.1 of the Banking Code Rules, 'Membership fees payable by Members shall be in proportion to their gross domestic assets as on March 31, of the previous year and shall be of such amount, as the Governing Council may determine as payable by each Member. The Governing Council (CC) in its 103^rd Meeting held on 31.01.2017 reviewed the financial position of BCSBI and has decided to retain the total membership subscription for 2017-18 at last year's level Rs. 800 lakh. Further, as the subscription is calculated based on individual "member's gross domestic assets as on 31.03.2016, the overall "Rate" for....
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....val of the organization. The corpus fund is generally not allowed to be utilized for the attainment of the purposes, but the interest/dividend accrued on such fund can be utilized for its activities as well as accumulated. Corpus funds are generally created out of corpus donation. A donation will be treated as corpus donation only if it is accompanied by a specific written direction of the donor. In the absence of any written direction of the donor, a contribution or grant cannot be transferred to Corpus Fund but for all practical purposes corpus fund is a permanently closed fund with no strings or restriction for future application attached. As such, it can be seen that Corpus Fund, for BCSBI, which is a Public Trust/Charitable Organization, is its "Capital", which cannot be used for any of its functions. It is only the interest, if any accrued on the same, which can be used for meeting the objects of the Trust. It is in the form of a Donation and Donee i.e. 'Member Bank' gives specific direction that the contribution given by them, entirely, to be credit to the Corpus (Capital) of BCSBI. As such, this amount cannot be termed as "Consideration" for BCSBI as they have no c....
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....on various Judgments beginning from EXHIBIT A-1 to EXHIBIT B-3 and also certain latest Service Tax Judgments have been submitted during the hearing. The issue is no more res integra as decided by Hon'ble Supreme Court, various High Courts and Tribunals throughout India for all taxing Statutes, Mere change in taxing Statute cannot make change in fundamental concepts. iii. IT SHOULD BE IN THE COURSE OF OR IN FURTHERANCE OF BUSINESS: For any activity to be considered as '"Supply", these 3 elements have to be fulfilled. From the submissions made above, it is clear that there is no "Consideration" involved in this activity and there is no existence of "2 persons", who will be "Supplier" & "'Receiver". The third criteria is that if any activity is to be termed it as a "Supply", it has to be in the course of Business or in the furtherance of "'Business". The definition of '*Business" has specific mention of activities of a "Club" in a particular manner, to be considered as "Business". Firstly, the rational of it being termed as "Business" is incorrect and is Unconstitutional as it is a cardinal Principle of Law that no man can trade with himself. However, without going to the nit....
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.... and related work to prepare the Codes of Banks commitment to Customers that are mandatory on their Member Banks. There is no provision of any benefit or facility provided by the Applicant to its Members. From the above submissions, it is amply clear that the activity of the Applicant does not fall under the ambit of "Business", at all. In view of the detailed submission made herein above and the submission made in the Application and the submissions made during the hearing in the matter, it is evident that the activity of the Applicant does not fall under the definition of "Supply" by any parameter and as such the Applicant are not required to obtain registration for such activity. In this backdrop, the issues which are requested to be addressed by the Advance Ruling Authority are as under: 1. Whether the activity of BCSBI I.e. The Applicant is falling under the definition of "Supply", as per Section 7 of the CGST Act, 2017? 2. Whether the contribution made by Member Banks to "Corpus Fund" can be considered as "Consideration", as per Section 2 (31) of the CGST Act, 2017, when the said is not "Income" of the Applicant? 3. Supply is meant to be between 2 persons, w....
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....n the backdrop of the above it is evident that the BCSBI fulfills the ingredients as per the relevant definition under section 2 as follows: • Section 2(84) "person" includes- • society as defined under the Societies Registration Act, 1860: • trust' and • Section 2(17) "business" includes- • any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; Section 7 • Scope of supply. (1) For the purposes of this Act, 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 fora consideration by a person in the course or furtherance of business; • Section 2(31) "consideration" in relation to the supply of goods or services or both includes--- • any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, • the supply of goods or services or both, whether by the....
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....ion as made in their ARA and submissions made therewith. Sh. Anil Khude, Asstt. Commr. of SGST Mumbai appeared and stated that they would be making submissions within one week. The applicant also requested to grant them further time till i.e. on 02.05.2018 for making further submissions in the matter which was considered. The applicant made further submissions on 02.05.2018. Certain further clarifications were sought from the applicant which were received by this authority on dated 30.07.2018. 05. OBSERVATIONS We have gone through the facts of the case. The main issue before us is as to whether GST is liable to be paid on the contribution made by Members towards "Annual Membership Fees and registration fees" to the Corpus Fund of the applicant and recurring expenditure being incurred by the applicant, The primary issue before us is as to whether the applicant is providing supply of services to their members and if so, is there any consideration received by them for such supply of services/ goods. We clearly find that in the subject case at hand there is no supply of goods. Hence the discussions would be restricted to supply of services only. Section 7 of the CGST Act, 2....
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....odes and standards and for that purpose to train employees of such Banks about the Banking Codes. v. To advertise and publish promotional literature in newspapers and otherwise about the Codes and Standards for the guidance and knowledge of the public through Web site, advertisements in the newspapers, magazines, journals, TV/Radio, hoardings or any other mode which the Society may deem fit. vi. To take up specific assignments, if any, in the areas coming under the Society's objects as projects, turnkey solutions or on any other terms of contracts with in-house resources or with the participation of outside agencies in order to fully implement the Code. vii. To organize teaching and training courses, conferences, seminars, lectures and similar other activities relating to the Codes and Standards or implementation of the said Codes and Standards. viii. To publish journals, reports, pamphlets, books, booklets, research papers in furtherance of the objects of the Society. ix. To maintain close contacts with Indian Banks' Association, other similar institutions, Boards and organizations having similar objects or allied objects by way of subscription, enrolment as a membe....
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.... would tantamount to supply of service to the said member banks. Secondly we are required to ascertained if these services are for a consideration or otherwise as we find that the second part of the definition says that ".......all forms of supply of goods or services.......for a consideration. For performing the said activities, the applicant requires funds which are collected by them in the form of Annual Membership Fees and registration fees. Even though as per their submissions these fees are not used by them, it is clear that the said fees which are termed by them as corpus fund are used to generate interest amounts which are further used for performing their activities. In other words if there is no fee there is no corpus fund and no interest payment which can be used to fund their activities which are in the form of supply of services to their member banks. Thus here there is no doubt that consideration is flowing from Banks to the applicant in the form of Annual Membership Fee and Registration Fee which are being utilized by the applicant for generating further income as found feasible by them. Thus the consideration is clearly in the form of Annual Membership Fee and....
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....oming members. Non-members would not be served by the applicant. The applicant has submitted that RBI provides for guidelines, which are mandatory for each and every bank i.e Co-Operative Banks, Scheduled Banks, Non-Scheduled Banks, Nationalized Banks, Foreign Banks who have their Branches in India. The Applicant prepares the Codes of Banks' commitment to Customers, which is in consonance with the basic frame work in line provided by the RBI related to consumer protection, but this supply of service is only to member banks and not to banks who have not become members. The applicant has also submitted that the Member Banks undertake to adhere to the Codes of Banks commitment to Customers and guidelines prescribed by the Applicant which clearly imply that adherence to codes and standards of the applicant gives further credence to the functioning and services of these banks. We find that they have submitted that the RBI guidelines are for the benefit of people who undertake any transaction with banks such as their Account Holders etc. This is an obligation on the Banks and the Applicant undertakes research and related work to prepare the Codes of Banks commitment to Customers....
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....body is voluntary. Hence the principle of mutuality is not at all applicable in present case. It is also mentioned that Banks have been constituted as per The Banking Regulation Act, 1989 and are a separate legal entity from the applicant body. The Principal of mutuality says that a person cannot make profit from himself. It can be clearly seen that Banks in India have been in existence a lot prior to the year 2006, when the applicant body was formed for the purpose of creating awareness and ensuring the correct following of the Codes and Standards for Services by the Banks in India, but here the applicant is only creating awareness about their member banks and that too after collecting Annual Membership and Registration fees from the Banks. With respect to the applicant's contention that "as regards the Principle of Mutuality in Service Tax matters, which is now replaced by GST, the issue is now pending before the Honorable Supreme Court of India (Constitution Bench). As such, till such time as the issue is settled by the Apex Court, the Principle of Mutuality should be extended to the levy of GST and no GST is leviable on the their activity even under the CGST Act, 2017 and th....