TaxTMI 
TaxTMI 
2020 (6) TMI 627
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....A-118/2018-19/B-46 dated 30.04.2019 = 2019 (7) TMI 616 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. Brief Facts of the Case 1. This Appeal is being filed by Rotary Club of Mumbai Queens Necklace ('the Appellant' or 'the club') against ruling no. GST-ARA-118/2018-19/B-46 dated 30.04.2019 = 2019 (7) TMI 616 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA pronounced by Maharashtra Authority for Advance Ruling. 2. The appellant, having Good and Service Tax ('GST') Registration No. 27AAABRO64311Z is an un-incorporated association of individuals. The club is affiliated to Rotary International, a worldwide organization with [520+] districts, [35000+] clubs and [1.2million plus] members. The object of Rotary is to encourage and foster the ideal of service. 3. For the sake of brevity, the structure of Rotary is explained as under: (i) Clubs - Rotarians are members of Rotary clubs, which belong to the global association Rotary International (RI). Each club elects its own officers and enjoys full autonomy within the framework of Rotary's constitution and bylaws. (ii) Districts - Clubs are grouped into RI districts, each led by a district governor. The district admini....
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....contribution from new members is collected on pro rata basis rounded to quarter/ half year. (ii) One time admission Fees from New Members (other than who are or were Rotarians). 9. The expenses are in the form of: (i) Meeting Expenses (ii) Fees and contributions to District or Secretariat of Rotary (iii) Other Administration expenses like printing, stationery, audit fees etc. 10. The amounts collected by way of fees are only pooled together and it is not expected to generate any surplus. Club is not formed to give any facilities or services to its members. The members gather under the umbrella of the club to perform socially relevant activities. 11. Club in normal parlance is understood to provide goods or services to its members such as recreation, sports etc. However, appellant does not provide any facilities or benefits in terms of goods or services to its members. 12. The activities relating to receiving donation etc. is carried out through a charitable trust which is registered under Bombay Public Trust Act, 1950. 13. To ensure the smooth and proper working of the club, membership subscription fees and admission fees are co....
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....p, subscription and admission fees from members is liable to GST as supply of services. (ii) Input tax credit of tax paid on Banquet and catering services cannot be availed. 20. Aggrieved by the above rulings passed by the AAR, the appellant has preferred appeal on the basis of the grounds mentioned herein under: Grounds of Appeal 21. The appellants are filing the present appeal on the following grounds, which are urged herewith without prejudice to one another. 22. Ground No. 1: - On the facts of the case and in law, Advance ruling authority has erred in holding that the amount collected as membership subscription and admission fees from members is liable to GST as supply of services. Detailed submissions: I. As per the definition of the term "Person" under section 2(84) of the CGST Act, 2017, there is no deeming fiction to treat the appellant and its members as different persons. Therefore, the vital condition for a transaction to be taxed under GST, that a supplier and recipient should be different persons is not satisfied. II. Appellant is an autonomous unit which collects its fees from its members to meet its administrative costs and to manage its....
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....s. In appellant's case, there is no facility or benefit provided to the members. The appellant cannot be said to be in business. The object of the appellant is to promote peace, Fight Diseases, Provide Clean Water, Sanitation and hygiene, Support Education, etc. It does not tantamount to business activity carried out by the appellant. (b) Consideration: * Under section 2(105), the term "supplier" has been 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 ....
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....association to its members cannot be taxed. iii. Concept of Mutuality (a) Foreign Jurisprudence: 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: * The identity of the contributors to the fund and recipients from the fund. * 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 * The impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expelled or returned to themselves. (b) Indian Jurisprudence: * Income Tax Law: Honorable court has also discussed the principles of mutuality in the case of CIT vs. Bankimpur Club Ltd. = 1997 (5) TMI 392 - SUPREME COURT 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 ....
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....Club of Gujarat Ltd v. UOI [2013] 40 STT 486 (Guj.) = 013 (7) TMI 510 - GUJARAT HIGH COURT concurred with Hon. Jharkhand High Court and held that club and members are not distinct persons, levy of service tax on such clubs/associations is ultra vires. To nullify the effect of above judgements w.e.f. 01.07.2012, clause (a) to explanation 3 to Section 65B(44) was inserted to provide that an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons. iv. As per the definition of 'person' provided u/s 2(84) of the CGST Act, 2017, there is no deeming fiction to treat association and members as different persons. 'Principle of mutuality' has its relevance in all taxation laws i.e. Income Tax Act, Service Tax Act, VAT laws, etc. Appellant is of the considered view that in absence of deeming fiction under GST legislation, decisions of Jharkhand High Court as well as Gujarat High Court shall squarely apply in the context of GST. Association or club and its members cannot be treated as different persons. Hence key condition to tax a transaction u/s 7 (1) (a), that supplier and recipient must be different, is not sat....
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....ount to supply u/s 7 of the CGST Act, 2017, GST is not leviable on membership fees collected by the appellant from its members. 23. Ground No. 2: On the facts of the case and in law, Advance ruling authority has erred in holding that Input tax credit of the tax paid on Banquet and catering services for holding members meetings and various events cannot be claimed. Detailed submissions: Assuming (but not admitting) and without prejudice to above grounds, if your honor holds membership fees charged from members is taxable supply liable to GST, then appellant should be entitled to claim ITC in respect of banquet and catering services: 24. As stated earlier, the objects of the appellant are to promote peace, fight diseases, provide clean water, sanitation and hygiene, support education, etc. 25. For the smooth functioning of the association and obtaining donations, the appellant conducts various meetings at hotels which are attended by members. Such meetings may be in the form of cultural programs followed by Lunch or Dinner. 26. Membership fees charged by appellant to the members covers such meeting expenses, other administration charges such as printing and statione....
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....ment of the supply imparts that essential nature to the composite supply. 32. Section 8 of Central Goods and Services Tax Act, 2017 provides as under: The tax liability on a composite or a mixed supply shall be determined in the following manner, namely: - a. a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; an b. a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. 33. Hence, the composite supply provided by the appellant to the members shall be treated as a supply of club / association service by the appellant. Organization of meetings, banquet and outdoor catering services will all form part of ancillary services provided to its members. 34. To determine input tax credit on food and beverages supplied by outside caterers, Section 17 (5) of GST Act, 2017 (as amended) provides as under: - (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following supp....
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....ed by Mr. Parag G Mehta and Mr. Ashok N. Shah, on behalf of the Appellant, wherein they reiterated the written submissions previously filed before us as well as the additional written submissions filed on the date of the personal hearing. In the aforesaid hearing, the Department was represented by Shri Durgesh Salunke, Deputy Commissioner Division III, CGST, Mumbai Central, who also reiterated the written submissions, filed before us. Appellant's Additional Submission dt. 04.11.2019 41. Ground No 1: Taxability of Contributions received by Club from its Members: a) Appellant reiterates the submissions made on Page 7 to 12 of the Appeal Memo. b) Further, the issue of taxability of Contributions/Collections received by Club from its Members is squarely covered under the Recent Supreme Court Judgement in the case of Calcutta Club Limited / Ranchi Club Limited. c) Views of Honorable Supreme Court on applicability of Sales Tax: - * The Supreme Court referred to the sixty first Law Commission Report, which made recommendations on the forty sixth amendment to the Constitution. It expressed that the Constitution was not specifically amended to bring....
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....sequently, services by a members' club to its members amounts to services to self and would not qualify as a service that attracts tax. This position was validated for both the pre- and post-negative list. e) In view of the fact that the concept of mutuality is being upheld by the Hon. Supreme Court during the service tax regime, the same principle will also be applicable in the GST regime also as there is no change in the legal position. f) The comparative chart of definition of services & supply under Service Tax & GST are enclosed herewith. It can be observed that there are no differences in the said definition. In fact, under service tax there was a deeming clause i.e. "An unincorporated association or a body of person, as the case may be, and a member thereof shall be treated as distinct person". The said clause is missing under GST. The intent in GST was never to treat club and members are separate persons. g) Further unlike other clubs which offer facilities like swimming, restaurant, gymnasium etc., Rotary Club does not have any premises for the said services. It conducts only meetings from third party premises and does not offer any facilities. H....
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....iations to members is not liable to Sales Tax / Service Tax on grounds of mutuality. Hence in the absence of any mechanism to treat the appellant and its members as separate persons the said service does not tantamount to supply u/s 7 of the CGST Act, 2017, GST is not leviable on membership fees collected by the appellant from its members. 42. Ground No 2: Assuming (but not admitting) and without prejudice to above grounds, if your honor holds membership fees charged from members is taxable supply liable to GST, then appellant should be entitled to claim ITC in respect of banquet and catering services: a) Appellant reiterates the submissions made on Page 13 to 15 of the Appeal Memo. b) Further it can be observed from the invoices that the Appellant is collecting the charges as under: * Contribution Towards Monday Meetings, Banquet Hall Charges and Spouse Events & * Contribution towards Club Activities, Rotary International Fees & Rotary Magazine Subscription c) Since a bundle of expenses are recovered in name of 'membership fees' from members, reference to the concept of 'composite supply' under CGST Act, 2017 is required: ....
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.... Respondent's Submission dt. 04.11.2019 43. In the instant case M/s. Rotary Club of Mumbai Queens Necklace has 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 Is 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 Rotary clubs are involved in two kind of activities: - i) Social Service Activities: - It is ascertained that M/s. Rotary Club of Mumbai Queens Necklace are into social services like all other Rotary clubs. Ex. Fighting diseases, Working towards education, etc. ii) Prof....
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....ormation, 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, input tax credit shall not be available in respect of the following, namely: - (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 hi....
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....pplying the above condition in the context of the impugned transaction, we would like to discuss the meaning of "business" as provided under section 2(17) of the CGST Act, 2017, the relevant extract in the context of the instant case is reproduced herein below: (17) "business" includes- (a)................... (b)................... ................... (e) provision by club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; ................... In the instant case, it has been submitted by the Appellant that entire subscription/membership amount collected by the Appellant from its members is utilized solely towards expenditures incurred in the meetings, communication and other administrative expenses like printers, stationeries etc. They have categorically submitted that they do not provide any facility or benefit to any of its members against the said subscription or membership fee. They further submitted that the object of the appellant-club is to promote peace, fight Diseases, provide Clean Water, sanitation and hygiene, Support Education, etc....