Common interest or goal is the foundation of every club through which the association or group of people unite together. For instance, clubs can be devoted to hobbies and sports, social activities, political and religious, voluntary or charitable activities.
In India, Goods and Service Tax (GST) is levied on “supply” of goods or services for consideration in course of furtherance of business. As per GST law in India, the definition of business among other includes “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”.
However, in various rulings under GST, principle of mutuality concept has been referred for the purpose of determining taxability/ non-taxability under GST on fees collected from members by clubs which resulted in point of debate on the subject. In this respect it is pertinent to mention that the basic principle underlying the principle of mutuality is that no one can make profit out of himself as explained in the matter of CIT Vs. Royal Western India Turf Club Ltd., 24 ITR p.551 (SC).
Recently, the Maharashtra Appellate Authority for Advance Ruling in the case of Rotary Club of Mumbai Queens Necklace provided relief and held that no GST is levied on the fees collected from members by the club since there is no supply of goods/ services.
It is to be noted that said ruling would be relevant for clubs having similar nature of facts and thereby can get the benefit of the ruling. The readers can refer the analysis of the Maharashtra AAAR in the case of Rotary Club of Mumbai Queens Necklace in this respect.
The appellant is a club (unincorporated association of individuals) registered under GST. The Appellant collects fees from its members which is utilised for meeting and administration purposes of the club such as printing, stationery, audit fees, etc.
The appellant approached the Maharashtra Authority for Advance Ruling (AAR) in 2019 on applicability of GST on fees collected by club from its members. However, the AAR held leviability of GST on said fees. Subsequently, appellant filed appeal before the Maharashtra Appellate Authority for Advance Ruling (AAAR) which passed the ruling in favour of the club. The relevant points from the facts of the case, contention of appellant and observations of AAAR are as under:-
The Ruling by Maharashtra AAAR in the matter of Rotary Club of Mumbai Queen Necklace has extended relief to the clubs with respect to applicability of GST on membership/ subscription fee collected from members.
However, it will not be out of context to mention here that, a contrary ruling has been passed by Maharashtra AAAR in the matter of Lions Club of Poona Kothrud wherein it was held that club is liable to take registration under GST to discharge their GST liability as the amount so collected is also for organizing leadership programs for direct benefits of the members. The intent or objective of any club or association is immaterial in so far as the leviability of GST is concerned and therefore provision of facility or benefits to its members will surely attract GST irrespective of the fact that such club is not set up with the objective of providing any goods or services to its members.
Thus, the activities of the entities/ clubs need detailed evaluation in order to take relief by applying the ratio of the Maharashtra AAAR ruling in the matter of Rotary Club of Mumbai Queen Necklace as said ruling cannot be applied as it is in case of each and every entity/ club.