TaxTMI 
TaxTMI 
2019 (7) TMI 1281
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....t, 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 MGS T Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT "The National Institute of Bank Management a premier Academic cum Training Institute was established in 1969 by Reserve Bank of India (RBI) in constitution with Government of India as an autonomous Apex Institute, with the mandate of playing a pro active role of "Think Tank" of the banking system. NIBM is registered as a society under the Indian Society Registration Act (XXI) of 1860. RBI, State Bank of India (SBI) & Other Public Sector Banks were the first members of Governing Board of this society to which, by rules of the society, the management of its affairs entrusted. Copy of Memorandum is attached for reference. As per Memorandum of Association, the objects for which the socie....
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.... which it collects fees other charges from the participants. NIBM charges GST on the said fees and charges collected from the participants. However, NIBM contends that the GST is not applicable on the contributions collected the Public Sector Banks on following grounds: i) it is a settled 'legal position that unless the link or nexus between the amount and the taxable activity can be established, the amount cannot be subjected to the tax; ii) contribution, donation or grant-in-aid is not specifically meant for a person receiving such training or to the specific activity, but is in general meant for the charitable cause championed by the registered foundation; iii) the contributions given by the Public Sector Banks are given freely in which the said banks do not receive any exclusive benefit in return; iv) the contribution, received by NIBM from the Public Sector Banks shall not be treated as "consideration" received for training or other taxable supplies; v) the supply" is defined u/s 7(1) of the GST Act as follows: "For the purposes of this Act, the expression "supply" includes (a) all forms of supply of go....
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....tutions in matters such as designing measurement tests for employee selection, appraisal programmes, conducting morale and productivity studies, streamlining organizational structure and to review, from time to time, the impact of educational, training and research activities and offer suggestions for filling the gaps in the banking and financial systems; 4) to promote and undertake faculty development programmes to assure an adequate supply of competent trainers to institutions conducting training programmes for the personnel of banking and financial institutions; c. Contributions collected from member banks: RBI, SBI & other Public sector banks in capacity of promoters of the Institute contribute now annually an amount of Rs. 100.00 lakh as subscriptions towards recurring expenses. The planned non-recurring expenses including the capital expenditure is also contributed based on the budget approved by the finance committee in their annual meeting. The member banks contribute towards the recurring and non-recurring expenditure in the following proportion: i) RBI 40% of - Rs. 100 lakh and the budgeted expenditure; ii) SBI 20% of- Rs. 100 lakh and ....
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....er their will but as per the resolution passed by the Governing Board. The contribution by the members is regardless of any services offered by NIBM. As stated in point number 17 of the Object Clause of MOA, the said contribution is to meet the recurring and non-recurring expenses incurred or as deemed fit by the society. The unspent contribution of one year is treated as 'income received in advance? and adjusted against the contribution of subsequent year. The contribution, therefore, cannot be said to be in the nature of consideration but it is more in the nature of aid / grant / subsidy received from the members to support functioning of the NIBM. 2. No "Business" Section 2(17) of the GST Act defines Business as follows: "business" includes a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any 0iher similar activity, whether or not it is for a pecuniary benefit; b) any activity or transaction in connection with or incidental or ancillary to sub clause (a); c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency; continuity or regularity of such transaction; ....
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....nsactions 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. 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) supply of services and not as a supply of goods. Perusal of the above would reveal that there has to be a supply of goods or services for a consideration by a person in the course or furtherance of business to meet the definition of "supply". In case of receipt of recurring and non-recurring contributions by NIBM from the member banks, there is no supply of goods or services neither there is any consideration nor business or furtherance of business thus the said receipts fall outside the scope of supply" and thus, shall not attract GST. As a matter of fact, there is no direct nexus / linkage between the contribution received from ....
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.... there is no commercial element embedded in such transaction, they are exempted from being taxed. Even in circumstances where surplus money is raised than what is needed to be pursued for the common purpose it would simply mean an increase of the common fund and hence would neither be considered as income nor it would be taxable. Principal 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 / derived by commerciality. The 'Principle of Mutuality' has been held as a cogent ground for non-taxability of an activity across various taxes such as VAT, Sales Tax as well as Service Tax in several cases. The 'Principle of Mutuality' would, therefore, be applicable even in respect of applicability of Goods & Services Tax. Principle of Mutuality was considered in CIT. v. Bankipur Club [1997] 92 Taxman 278 (SC) = 1997 (5) TMI 392 - SUPREME COURT. These principles are applicable and have been applied by the Calcutta High Court in Saturday....
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....ed out of contribution collected Developing, publishing and publicizing banking codes No service 4. Benefit to members Increased credibility of the banks, advertising, etc. No benefit 5. Consideration for services offered No separate consideration, annual membership fees are utilised for the same. Separate fees are charged and GST is levied on the same. 6. Furtherance of business advertising and publishing promotional literature in newspapers and are also organizing, teaching and training courses, conferences, seminars and lectures and also publishing journals, pamphlets, reports, books and booklets in this regard No facilities are provided to members against the subscription amount, as the said amount is utilised for recurring and non- recurring expense. As there is no business, there is no furtherance of business. 7. Supply - publishing and promotions - increased credibility of member banks -increased client base supply -No facility - -No business -No furtherance of business and no supply 8. Necessity of the service provided Yes, in case no service was provided by banking codes, there was requirement of the service as....
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....moting national development By using the unique codes developed, credibility of the member banks is increased, hence no national development the services provided are for spreading of education, creating awareness and promoting national development Similarities between Poona Club and NIBM Sr.No. Similarity Poona Club NIBM Ruling 1. Utilization of contribution by members The contribution is received for defraying meeting expenses, administrative expenses and other common expenses The contribution is received towards recurring and non-recurring expenses in favour of assessee 2. Principle of mutuality Exists Exists 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 GST Act. Having observed so, we refrain from any further discussion. 3. Services received out of contribution collected No services received by members out of contrib....
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....nducting education and training programmes by charging fees from the participants are covered under the definition of supply; and hence liable to GST. NIBM conducts similar activities of education and training; GST is charged on the fees received from the participants as such activities are covered by definition of supply. 2. Services provided to members hence the annual fees / contribution received Services are provided only to the members, is in the nature of consideration Services are offered to members as well as non-members. However, the same are charged with GST. Contribution received from members, is and or non members towards the recurring and non-recurring expenses and thus in our view should be exempted from levy of GST 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- on 15.04.2019 "Ms. National institute of Bank Management (NIBM) is registered as a society under the Indian Society Registration Act, Activities of National Institute of Bank Management are to plan, promote, and Doc-vide for education and training in operation and management of Banking and financial institutions and to undert....
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....ion and management of banking and financial institutions, to undertake conferences, seminars. 2. To promote and conduct research in : (a) Improvement of banking operations (b) Training and development of banking personnel. (c) Maximum augmentation and effective deployment of Bank's resources: 3. To assist banking and financial institutions in matters such as designing measurements for employee selection etc. 4. To promote and undertake faculty development programmes. 5. To maintain liaison with banking and financial institutions. RBI, SBI and other Public Sectors Banks in capacity of promoters of the institute contribute annually an amount of Rs. 100 lakhs as subscriptions towards recurring expenses. NIBM runs different courses and training programs in their campus for which it collects fees and other charges from the participants, After going through above details it is evident that NIBM fulfills the ingredients of section 2 as follows: - Section 2(84) "person" includes - Society as defined under the societies Registration Act, 1860; trust - Section 2(17) "business" includes Any trade, commerce, manufacture....
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....under section 2(17) (e) of the CGST Act, 2017. The case of NIBM is very similar to the case of BCSBI and the ratio of Advance Ruling in case of BCSBI squarely applies to NIBM. Therefore the consideration paid as subscription or contribution towards recurring or capital expenses or reimbursement or by whatever name called to National Institute of Bank Management (NIBM); a society registered under Societies Registration Act, 1860 by its members for its recurring and non-recurring expenses is leviable to GST. 04. HEARING Preliminary hearing in the matter was held on 16.04.2019. Ms. Anagha Kotwal, Accounts Manager, appeared and requested for admission of their application. Jurisdictional Officer Sh. M. A. Bhagat, Dy. Commr. of S.T. (E-611 ), LTU-1, Pune appeared and made written submissions. The application was admitted and called for final hearing on 06 06.2019. Ms. Anagha Kotwal, Accts Mgr & Sh. Abhijit Kulkarni, C.A. appeared, made oral & written submissions. Jurisdictional Officer Sh. M. A. Bhagat, Dy. Commr of S.T. (E-611), LTU-I, Pune also appeared and made written submissions. 05. OBSERVATIONS 5.1 We have gone through the facts of the case, documents on record ....
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....undation; the Public Sector Banks do not receive any exclusive benefit in return for the contributions so made. 5.5 The applicant has stated that the sources of income is from (i) Short term Training courses offered to banks; (ii) Consultancy related to specific needs of banks; (iii) Research activities for banks and (iv) Post Graduate Diploma in Management (Banking and Financial Services) PGDM. PGDM course offered by NIBM is recognized under AICTE and hence, exempt under GST and for all the other above revenue generating activities, GST is levied on the fees collected by NIBM. 5.6 We find that in the subject case, the applicant receives certain amount of contribution from public sector banks and RBI to cover certain recurring and non-recurring expenses incurred by them. The question that comes to our mind is as to what these recurring and non-recurring expenses are. From the submissions made by the applicant, we find that as per Memorandum of Association, the expenses are incurred for promotion and conducting of research in matters pertaining to the improvement of banking operations, pertaining to the maximum augmentation and effective deployment of banks' resources includin....
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....der the Principle of Mutuality". 5.10 We do not agree with the applicant's contention that their activity would be covered under the 'Principal of Mutuality' i.e. "No man can trade with himself; he cannot make, in what is its true sense or meaning, taxable profit by dealing with himself'. This assumption is made by the applicant considering that they and the various Public Sector banks and RBI are one and the same. We find that : a. in the subject case, as per the definition of "person" under the GST Act, 2017, there are two persons namely, the applicant and the other person being the members of the applicant i.e the Public Sector Banks. Hence the club and member are distinct entities. b. 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 activities of the applicant mentioned above can clearly be considered as service being provided by the respondents to its members. c. From the inclusive definition of the term 'consideration' it can decisively be construed that the contributions received by the applicant from the RBI and other Public Sector Banks ....