TaxTMI 
TaxTMI 
2020 (6) TMI 627
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....019 (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 administration, includes District Secretary, District Treasurer, as....
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....n 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 collected from members. The amounts collected are then utilized for administration purposes of the club. 14. In order to avoid unnecessary and unwanted litigation, the appellant was erstwhile....
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...., 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 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 ....
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....ration: * 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 (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 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 bath supplied; * Harmonious reading of both the abo....
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.... 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 class of contributors and the class of participators. The particular label or form, by which the mutual association is known, is of no consequence." * Service Tax Law: ■ Principle of mutuality was always a point of debate in service tax regime prior to 01.07.2012. Whether club and its member can be regarded as two separate taxable person was the issue of concern. ■ Honorable Jharkhand High court in case of Ranchi Club Ltd. v. Chief Commissioner [2012] 26 S.T.R. 401(Jhar.) = 2012 (6....
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....inition 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 satisfied. Therefore, transaction of providing services by an association to its members cannot be taxed u/s 7(1)(a). e) Explanation for transaction to be outside the purview of Clause (c) of section 7(1): i. 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. ii. Entry Number 2 of schedule I provides that supply of goods or services or both between related persons or between distinct persons as sp....
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....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 stationery, audit fees, etc. The membership fees are towards recovery of expenses, one of which is banquet and catering services. Membership fees are collected by appellant well in advance from the members. 27. 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: (30) "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of whic....
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....uet 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 supply of goods or services or both, namely: - (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause(a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods and services or both shall be available where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; 35. Appellant procures various supplies such as services of prof....
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....e 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 dubs within the tax net. It relied on the three reasons in this report, viz. (a) the number of such clubs and associations would not be very large; (b) taxation of such transactions might discourage the cooperative movement; and (c) no serious question of evasion of tax arises, as a member of such clubs consumes his own goods. * The Statement of Objects and Reasons for the forty sixth amendment to the Constitution observed that while sale by registered club or other association of persons (the club or association of persons having corporate status) to its members is taxable, sales by an unincorporated club or association of persons to its members is not taxable. This is because such club or association, in law, has no separate existence from that of its members. * The Statement of Objects and Reasons for t....
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.... 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. Hence the Rotary Club cannot be covered under the Clause (e) of Section 2(17) of GST Act which defines business to include "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;". h) Further the deeming fiction created under Entry 7 to Schedule II of the CGST provides that goods supplied by unincorporated associations or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be classified as goods under the GST Law. No such deeming fiction has been created under Schedule II with respect to supply of services. Hence following the ratio of the judgement, it can be strongly held that: - * Supply of goods and services by incorporated entities to its members would not be taxable under GST * Supply of services by an unincorporated entity to its members wo....
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.... recovered in name of 'membership fees' from members, reference to the concept of 'composite supply' under CGST Act, 2017 is required: (30) "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goads or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; d) 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, namely: - (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause(a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit ....
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....ing diseases, Working towards education, etc. ii) Professional and Recreational Activities: - Along with Social service activities, the M/s. Rotary Club of Mumbai Queens Necklace is also involved in other activities for their members which are not related to social cause and are discussed below: a. Rotary club invites eminent personalities for guest lectures and guidance for the members to enhance their professional leadership and personal skills. Through regular meetings and events, the members of the Club will connect with other leaders towards changing the world and expand their leadership and professional skills. There are various articles on public domain like "Why Rotary? What Our Members Receive Brad Howard, RID 2015-1 T' from which it can be understood that members are benefitted by these meetings with eminent personalities and their guidance while at the same time such privileges are not available to a non-member. It is also said that 'Rotary Club Membership allows 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. b. It further appears that in Rotary Global Rewards, ....
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....r hiring of motor vehicles, vessels or aircraft referred 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 credit 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 element of a taxable composite or mixed supply; ii. Membership of a club, health and fitness centre iii. Travel benefits extended to employees on vacation such as leave or home travel concessions. Provided that the input tax credit in respect of such goods 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 Ciub or association cannot claim input tax credit on the tax paid on catering and other such services. Discussions and Findings 44. Heard both the parties. We have also gone through the entire case records including the facts of the case, rulings pronounced by AAR, and th....