TaxTMI 
TaxTMI 
2019 (8) TMI 819
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....pply of goods or services? 3. Whether the applicant would be a Taxable Person under the provisions of the Act? 4. If answer to question no.3 is affirmative, who shall be person responsible under GST, as office bearers keep on changing every year? 5. Whether the said collection of funds under common pool and spending back on the same said contributors, would entail 'supply' as defined in the law. 6. If answer to Question no.5 is affirmative, whether the same would be supply of goods or services? 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. 2. FACTS AND CONTENTION - AS PER THE APPLICANT Statement of relevant facts having a bearing on the question(s) raised 1) 'Rotary' is an International organization having clubs in 216 cou....
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....the location and light refreshments. These meetings are held for all the members to meet from time to time to review existing activities for keeping a tab on the same and consider new projects for execution. It is in these weekly meeting that the charitable proposals are considered, discussed and approved or rejected for taking up as a likely cause for execution by the members. The projects already executed or underway are also discussed to keep a tab on the progress of a project or to ascertain the benefit that a particular project is yielding. These contributions collected are spent by the end of the year and generally there is a deficit which is then borne by the Office Bearers for the said year in question or Members from their pockets for the weekly meetings or a meagre surplus. The Admin Account is being managed as if it is purely an agent of the members and no actual service is being extended to the members. Furthermore, on perusal of the Constitution & Bye-Laws (the same shall be produced at the time of the personal hearing), it clearly indicates that the administration and working of the Association and Implementation of policies are established and are implemente....
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....es incurred in meeting the common objective of betterment of society. Hence we are not recovering any taxes on the contribution being recovered from the members. There is no other income being earned by the said Administrative Account and generally each year is a deficit. The purpose of holding the said meetings as per the Club is as under: All the meetings conducted would be to promote the Five Avenues of Service being Club Service, Vocational Service, Community Service, International Service & New Generations viz. to promote charity and overall well being of society. Further, the collection of the sums against the reimbursement of the expenses is being done as per following understanding: The budget for the forthcoming year shall be prepared by the incoming president in consultation with his team of board members and placed before the Members for approval. Based on the approval towards the budget for the following year, the annual reimbursement charges to be recovered from each member will be finalised which would then be formally communicated to each member to remit. The said reimbursement would include the reimbursement towards payment for RI per capita dues, a subs....
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.... to ascertain the benefit that a particular project is yielding. These contributions collected are spent by the end of the year and generally there is a deficit which is then borne by the Office Bearers for the said year in question or Members from their pockets for the weekly meetings or a meagre surplus. The Admin Account is being managed as if it is purely an agent of the members and no actual service is being extended to the members. For the purposes of the accounting of the said affairs of the Administration Account, the year is followed from 1st July to 30th June of the following year. In the context of GST, definition of persons is provided u/s.2(84) of the CGST Act, 2017. As per said definition, there is no deeming fiction to treat association and member as different persons. Hence, in our humble opinion, the key condition to tax a transaction u/s.7(1)(a), that supplier and recipient must be different, is not satisfied. Hence the transaction of providing services by an association to its members should not be taxed u/s.7(1)(a). Earlier in service tax regime, courts, in several cases held that in absence of deeming fiction, treating club/association & its member as ....
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....ommercial consideration whatsoever. Going with principal of mutuality, two distinct persons are missing. Even in case of a visiting guest at the meetings, estimated amount of expense recovered from the Guest in the form of Guest Fees, thus ensuring the collections on this account are spent entirely on the members only. Since, there is no commercial consideration involved in the process, just that the funds are collected in a common pool for meeting the expenses for the weekly meetings and other petty expenses incurred in meeting the common objective of betterment of society. The amount being collected from the members is reimbursement of expenses or share of contribution. We do not function on commercial basis. Hence we are not recovering any taxes including GST on the contribution being recovered from them. The common pool is being spent back on the members only. In absence of two distinct persons and also in absence of consideration, as defined under the Act, in our opinion, contributions received from the members in the Administration Account would not qualify as a Supply within the meaning of the term, as defined under the Act. The applicant is of the opinion that i....
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....d. 226 ITR 97 = 1997 (5) TMI 392 - SUPREME COURT also the Hon'ble Court discussed the principles of mutuality and at page 103 held as follows: It should be noticed that in the case of a mutual society or concern (including a member's club), there must be complete identity between the class of contributors and the class of participators. The particular label or form, by which the mutual association is known is of no consequence. The said principle which has been laid down in the leading decisions and emphasized in the leading English text books mentioned above, has been explained with reference to Indian decisions in "The Law and Practice of Income tax" (English edition Volume 1, 1990) by Kanga and Palkhiwala at page1113 thus: "..........The contributors to the common fund and the participators in the surplus must be an identical body. That does not mean that each number should contribute to the common fund or that each member should participate in the surplus or get back from the surplus precisely what he was paid "The Madras, Andhra Pradesh and the Karnataka High Court have held that the test of mutuality does not require that the contributors to the commo....
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....ess of benefits or facilities to the members. From the above it can be interpreted that, to satisfy the definition of "Business", there must be some benefit/facility to its members. In our case there is no benefit facility to the members of the Rotary club, Further it can be seen whether the supply of services between club and its members is for a consideration. CONSIDERATION: - It is worthwhile to refer to the definition of "supplier" as provided u/s.2(105) & "receipt" as provided u/s.2(93). Both the definitions are reproduced below: Sec. 2(105) "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 Sec. 2(93) "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 to 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 ....
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....ngth from the provision in Article 366(29A)(e) of the Constitution according to which a tax on the sale or purchase of goods includes a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration." Following observations may be noted in reference to the above circular. a. Above circular has not considered the definition of "supplier" as well as "recipient" before taxing a transaction u/s.7(l)(a). There must be two different persons to tax a transaction under said provision. Merely because an association of person has been included as person u/s.2(84) does not imply that members of such association are different persons. b. Circular has invoked the concept of deemed sale as provided under Article 366(29A) of the Constitution. It must be noted that clause (e) of said Article only enables to tax supply of goods by an association to its members as deemed sale. It does not enable to tax supply of service as a deemed service. Even para 7 of Sch Il only covers supply of goods by any unincorporated association. It does not cover supply of services unless provision s....
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....pray to submit that transaction between an association or club and its member will not be covered within the scope of supply Ws.7 of the CGST Act, 2017. Hence the same shall not be taxable. Comparative Analysis of the Purpose of Formation of the Lions Club vis-a-vis Rotary Club Lions Club Rotary Club of Mumbai Nariman Point Purpose: To create and foster a spirit of understanding among the peoples of the world. To promote the principles of good government and good citizenship To take an active interest in the civic, cultural, social and moral welfare of the community. unite the members in the bonds of friendship, good fellowship and mutual understanding. 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. 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. (Ref. page 7 of the AAR Order passed in the case of Lion Club) Pursue the object of ....
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....ve / companion), Dongri Remand Home support, Coolers and Benches at Railway Station, Marathon Support for needy candidates (from Ladhak), Toilet Blocks Talent Show for Senior Citizens, etc. (Ref. Page 18 of the Paper Book for Trust Documents, being the list of activities carried out in F.Y. 2017-18) Purpose/ Objects as per Trust Deed: Affording all type of Medical relief and aid in terms or money, hospitalisation, consultations and conferences including setting up of hospitals or other medical institutions and running them or granting of subscriptions and donations in them for administering medical relief the poor and needy. Affording all types of help in providing cash, food, clothing and shelter to the poor and needy including orphans and widows. Establishing or affording all types of help for sufferings, social unhappiness, poverty, helplessness or to any institution for the alleviation of human suffering. Promoting the social and economic uplifting, welfare of the public in rural areas and more particularly covering various activities in the socio-economic, agriculture, animal husbandry, veterinary medical and education fields. Giving assistance for education an....
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.... and for administrative purposes. The expenses incurred for the weekly meetings include the expenses for the location and light refreshments. These meetings, where charitable proposals are considered, discussed and approved/rejected are held for all the members so as review existing projects/ activities and also to consider new projects for execution. They have further submitted that their prayer specifically relates to non-applicability of GST on: 1. Club member fees; 2, District fees collected from Clubs & 3. Any other payment being disbursed to Rotary International as annual contribution on behalf of the Members. They have also submitted that Admin Account is being managed by them as a pure agent of the members and no actual service is being extended to the members. They have stressed that the principle of mutuality exists in their case and therefore they are not liable for GST on the fees/amounts received by them. According to their submissions, they are required to maintain two separate bank accounts, one for administrative expenses and other for donations/charity. The receipts in donations/charity account are used exclusively for the purpose of donation/ charity and such amou....
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....ned in the law. 6. If answer to Question no.5 is affirmative, whether the same would be supply of goods or services? We find that as per the definition of "person" under the GST Act, 2017, there are two persons namely, the applicant and the other person being the "member" of the applicant. Hence the club/organization and member are distinct entities. 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 applicant in as much as they are striving to set high ethical standards in business and profession, recognition of worthiness of all useful occupations, dignifying each Rotarian's occupation as an opportunity to serve society, application of the ideal of service in each Rotarian's personal, business and community life, exclusively for their members can clearly be considered as service being provided by the respondents to its members. Under the GST ACT consideration in relation to the supply of goods or services has been defined to include any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the i....
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....ture of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (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) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) 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 (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. In the context of the GST Laws the objectives or the purpose of the applicant is inconsequential, since there is no mention of term such as objective or purpose in the definition of the term "business" under the GS....