TaxTMI 
TaxTMI 
2019 (7) TMI 616
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....arious events? 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 any 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, the expression 'GST Act' would mean CGST Act and MGST Act. 02. FACTS AND CONTENTIONS - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- • "Rotary Club of Mumbai Queens Necklace (hereinafter referred to as "Rotary" or "Club") is an un-incorporated association of individuals. The club is affiliated to Rotary International, a worldwide organization with 520+ districts, 35000+ clubs and 1.2 million plus members. The object of Rotary is to encourage and foster the ideal of service. • Advance Ruling Application is being filed by the club i.e. Rotary Club of Mumbai Queens Necklace. • For the sake of brevity, the structure of Rotary is explained as under: a) Clubs - Rotarians are members of Ro....
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.... and neither has it rendered commercial service to its members nor does it render services to outsiders for a fee. • For the said purpose clubs receive contribution from its members for incurring expenditure on its meetings and communication. The receipts majorly comprise of: a) Fees from members which in essence is contribution towards yearly expenses. The contribution from new members is collected on pro rata basis rounded to quarter/ half year. b) One time admission Fees from New Members (other than who are or were Rotarians). • The expenses are in the form of: a) Meeting Expenses b) Fees and contributions to District or Secretariat of Rotary c) Other Administration expenses like printing, stationery, audit fees etc. • The amounts collected by way of fees are only pooled together and it is not expected to generate any surplus. Club has not been formed to give any facilities or services to its members. The members gather under the umbrella of the club to perform socially relevant activities. • Club in normal parlance is understood to provide goods or services to its members such as re....
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.... its members to meet its administrative costs and to manage its activities. Therefore, the principle of mutuality is applicable and since the fees so collected are only pooled together for convenience and for defraying administrative and other expenses and hence, the same should not be brought under the purview of GST. • Principle of Mutuality: 1) In the case of English and Scottish Joint Co-operative Whole society Ltd. V. Commr. Agr of I. T. (1948) 16 ITR 270 (PC) = 1948 (4) TMI 2 - PRIVY COUNCIL, there are three conditions stipulated by the judicial committee, the existence of which establishes the doctrine of mutuality: a) The identity of the contributors to the fund and recipients from the fund. b) The treatment of the company, though incorporated as a mere entity for the convenience of the members and policyholders, in other words, as an instrument obedient to their mandate, and c) The impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expelled or returned to themselves. 2) The Honorable court has also discussed the principles of mutuality in the case of CIT vs,....
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....en defined as follows: "Supplier" in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied; Under section 2(93), the term recipient has been defined as follows: "recipient" of supply of goods or services or both, means (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (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 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; ....
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.... transaction to be outside the purview of Clause (c) of section 7(1): Clause (c) of section 7(1) clause covers the activities specified in Schedule I, made or agreed to be made 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 between in section 25, when made in the course or furtherance of business shall be taxable. Members are not covered under section 25 as distinct person. Therefore, can the Club and its members be considered as related person? Explanation to section 15 of the act explains the term related person as follows: 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 another's businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; (iv) any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them; ....
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....he reply of the jurisdictional officer. Our clarifications are as under: 1. We reiterate the submissions made while filing the application and additional submissions on 18.03.19. 2. We once again reiterate that the club has not been formed to provide any supply of goods or services to the members. The club which is nothing else but group of service oriented individuals who have come together only collects the budgeted expenses from its members to incur the meeting expenses, administrative expenses and payment to Rotary International. Holding of meeting at a good venue does not make the said collection taxable. We would also draw your attention to the Advance Ruling in the case of Lions Club of Kothrud, Pune wherein the Advance Ruling authorities in identical scenario have held that "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 purpose of GST Act." 3. As discussed in the course of hearing, the club invites various speakers (for which no considerations paid to them or charged to members) in its meetin....
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.... members to sit next to people with whom he/she may have to pay $250 an hour to meet" this clearly shows that there is furtherance of business involved. We reiterate the submissions made in Point 3 stating the purpose of said meetings. Further the copies of audited accounts of the club have been submitted to your good offices. There is no collection of any type from members other than membership/entrance fees. As mentioned the purpose of said meetings is for members to become leaders to perform towards the causes of the clubs and not personal gains. The meeting with other NGOs or corporates is for the purpose of raising funds for the charitable objects and also showing to the corporate the effective projects for their Corporate Social Responsibility spending. Bill Gates of Microsoft or Rajashree Birla has been contributing large sums of money to Rotary for eradication of polio programs worldwide including in India and this is not possible unless the members connect with other members and corporates. The speakers who come to Rotary also support the activities of Rotary by spreading the good work to others. b) It further appears that in Rotary Global Rewards, wherei....
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....as it rendered commercial service to its members nor does it render services to outsiders for a fee. The events are held by the club for holding lectures and fun raising events. None of the events are in the form of recreational events. The club accounts are kept separate from the charitable activities which is carried out under the registered charitable Trust both under the Public Trust Act as well as Income Tax Act. The club has submitted the audited accounts of Rotary Club of Bombay Queens Necklace Charitable Trust under whose aegis all the charitable projects are carried out. All donations and charitable activities are made from the said Trust. The Trust has undertaken various activities like donation of machineries to hospitals, Cancer Screening and Detection Camps, diabetes check up camps etc. The Club members meet at their own expenses for the said purpose. e) Input Tax Credit of banquet and catering services for holding members meetings and various event is not allowed u/s of CGST Act. As per the provisions of CGST Act, Input Tax credit of Food & beverages, outdoor catering is not allowed u/s except where such goods or services or both is used by ....
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....s or services or both shall be available where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. In view of the above it is to state that the Club or association can not claim input tax credit on the tax paid on catering and other such services." Additional submissions In the instant case M/s. Rotary Club Of Mumbai Queens Necklace have raised two queries which are as under: 1. Whether the amount collected as membership subscription and admission fees from members is liable to GST:- 1.1 According to the Article 8 of Section 1 of Bylaws of the Rotary Club of Mumbai Queens's Necklace that club committee co-ordinates their efforts to achieve club's annual and long term goals. Each club should have the committee listed in Article 13 section 7 of Standard Rotary club constitution. However, M/s Rotary Club of Mumbai Queens Necklace have not submitted the copies of Article 13 section 7 in their application. Therefore, in order to ascertain the responsibilities and privileges of the Committee and their members, the department searched the literature available on internet, it has come to department's notice that Ro....
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....M/s. Rotary Club of Mumbai Queens Necklace, it is observed that M/s. Rotary Club Of Mumbai Queens Necklace had arranged "spouse events" and "spouse night expenses" which clearly amounts to recreation activity and hence it falls under tax net. Hence on going through the above information, it appears that the Club & Association does not provide only Social Services as an NGO, but also have other functions relating to Personal Functions which clearly amounts to furtherance of business. In lieu of consideration received as membership fees, admission fees and subscriptions are taxable as supply of services under GST. So prima facie there appears a levy of GST on the issue on above said issue. 2) If receipts are liable to GST, can the club claim input tax credit of the tax paid on banquet and catering services for holding members meetings and various events? 2.1. In this regard, it appears that according to Section 17 (5)(b) of CGST Act, 2017 mentions various situations wherein ITC cannot be availed. The Section 17(5)(b) is reproduced is as under:- Section 17(5):- Not withstanding anything contained in Sub-Section (1) of section 16 and Sub-Section (1) of section 18, inp....
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....her rotary members and also they use their skills and expertise and advice to further development from business point of view which clearly amounts to furtherance of business. It appears that in Rotary Global rewards, wherein the members not only enhance their business but they learn from and identify with the leaders in their community. It is also said that "Rotary allows members to sit next to each other every week and if fails, members would otherwise had to pay $250 an hour to meet" This clearly shows that there is furtherance of business. Also Rotary club invites eminent personalities for guest lectures and guidance for the members to enhance their professional and personal skills. It also appears that Rotary clubs charges fees to admit a person as their member who is not used for any social cause. The same can be seen from the Balance sheet submitted by M/s. Rotary Club of Mumbai Queens Necklace. There are no funds used for any social cause. On the contrary it is observed from tax invoice no 166/18-19, 186/18-19 and 091/18-19 and schedules of the Balance sheets attached with the application by M/S. Rotary Club of Mumbai Queens Necklace, it is observed that M/s. Rotar....
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....or the purposes specified therein (ii) where received by a taxable person engaged- (i) In the manufacture of such motor vehicles, vessels or Aircraft,' or (ii) in the supply of general insurance services in respect of Such motor vehicles, vessels or aircraft insured by him; (b) The following supply of goods or services or both i) Food & beverages, outdoor catering, beauty treatment, Health services, cosmetic & plastic surgery, leasing renting or hiring of motor vehicles, vessels or aircraft referrers to in clause (a) of clause (aa) except when used for the purpose specified there in, life insurance and health insurance. Provided that the input tax cr4edit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making as outward taxable supply of the same category of goods or services or both or as as element of a taxable composite or mixed supply, ii) Membership of a club, health and fitness center iii) TraveI benefits extended to employees on vacation such as leave or home travel concessions Provided that the in....
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....ly" under the GST Act. - Applicant club, as per the facts put up, does not render any "Supply" for the purposes of the GST Act. Hence registration under GST is not required'. We find that the said order of the Maharashtra Advance Ruling Authority in respect of "Lions Club of Poona Kothrud" has been overruled, on an appeal filed by the department before the Appellate Advance Ruling Authority, Maharashtra. The Appellate Authority in the said case has observed and found as under: (A). As per the definition of "person" under the GST Act, 2017, there are two persons namely, the Lions Club and the other person being the "member" of the Lions Club. Hence the club and member are distinct entities. (B). The Rulings and Case Laws cited by the Lions Club pertained to Income Tax matters and not service tax matters. (C). "The GST law has given very wide connotation for services, which will cover any activity other than which involves goods, money and securities. Therefore the activity of the respondent (Lions Club) in as much as they are conducting the leadership program exclusively for the Lions Club members can clearly be considered as service being provided b....
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....evelopment program for their subscribed members , do not appear to before transforming members into leaders generally but for the members to become leaders to perform towards the causes of the Club, as the objectives or the purpose for the transformation of the members into leaders is inconsequential in the context of the GST Laws, since there is no mention of term such as objective or purpose in the definition of the term "business" under the GST Act." 4. Under the GST Law, the intent or objective of any club or association is immaterial in so far as the leviability of GST is concerned. In view of the above said observations made by the Appellate Authority in the appeal filed by the department, against the order of Advance Ruling Authority, in the case of Lions Club of Poona, Kothrud, the said authority has set aside the order of the AAR, which has been heavily relied upon, by the applicant, in the subject case. Since the Applicant themselves have submitted that the facts in their case are similar to the case of Lions Club of Poona, Kothrud, which has been overruled by the Appellate Authority, the observations and findings made by the Appellate Authority in that cas....