Membership and subscription fee charged by clubs – Relief under GST

Govt. Agencies and Taxation | Comments (0)

Like

Summary: In a recent ruling by Maharashtra AAR it was held that membership, admission or subscription fee is not liable to GST as supply of service.

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.

 

Maharashtra AAAR in  the case of Rotary Club of Mumbai Queens Necklace


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:-

 

Facts of the Case


     
  1. Rotary Club work with rotary  foundation to promote peace, fight diseases, provide clean water, sanitation  & hygiene, save mothers and children and support education.
  2.  
  3. The purpose of club is to promote  integrity and advance world understanding, goodwill and peace through  fellowship leaders.
  4.  
  5. The members come together to form  a rotary club and is not a service club.
  6.  
  7. There is an annual budget of  expenses and the money is pooled by the members in equal share.
  8.  
  9. It is not for the profit  institution and neither has it rendered commercial service to its members nor  does it render service to outsiders for fee.
  10.  
  11. The club receive contribution  from its members for incurring expenditure on its meetings and communication in  the form of quarterly/ half yearly membership fees to meet yearly expenses such  as meeting expenses, administration expenses like printing, stationery, audit  fees, etc. Apart from it, one-time admission fees is received from new members.
  12.  
  13. Club in normal parlance is  understood to provide goods or services to its members such as recreation,  export, etc. However rotary club does not provide any facilities or benefits in  terms of goods or services to its members.
  14.  
  15. The club organizes events for the  purpose of enabling members to meet and interact with each other.
 

Legal Contention of the appellant


     
  1. The vital condition for a  transaction to be taxed under GST that the supplier and recipient should be  different persons is not satisfied since there is no deeming fiction in the  definition of a person under Section 2(84) of the CGST Act to treat the appellant  and its members as different persons.
  2.  
  3. In order to tax the transaction,  the supply must be for a consideration by a person in course of furtherance of  business, however there club is not receiving consideration for furtherance of  business.
  4.  
  5. In the erstwhile Service Tax law,  it has been held by various courts that club and its members are distinct  person and thus not subject to service tax on the basis of concept of  mutuality.
 

Observations  & Order by Maharashtra AAAR

     
  1. Appellant is not providing any  specific facility or benefits to its members against the membership  subscription charged by it as the entire subscription amount is spent on  meeting and administrative expenses only.
  2.  
  3. Activities of the Appellant will  not be construed as “supply” under GST.
  4.  
  5. Amount collected as membership  subscription and admission fees from members is not liable to GST as supply of  service.

 

Steps to be taken  by Clubs (Association of Persons)


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.

Copyright 2024 – Helpline Law

ENQUIRY FORM

You could get in touch with our team to find a suitable lawyer for assistance.
Helplinelaw has been referring lawyers that fit your needs in terms of seniority and experience since 2001

Other Latest Articles