Maharashtra Authority for Advance Ruling: The Bench of Rajiv Magoo, Additional Commissioner of Central Tax (Member) and T.R. Ramnani, Joint Commissioner of State Tax, decided whether GST will be payable on services provided by Club to its Members against monthly contribution?
Instant application was filed by the applicant seeking an advance ruling in respect of the following questions:
- Whether the activity of the applicant i.e. collecting contributions and spending towards meeting and administrative expenditures only, is ‘business’ as envisaged under Section 2(17) of the CGST Act, 2017?
- Whether contributions from the members in the Administration Account, recovered for expending the same for the weekly and other meetings and other petty administrative expenses incurred including the expenses for the location and light refreshments, amounts to or results in a supply, within the meaning of supply?
Applicant arranges meetings for its members and in order to defray its expenditure for such meetings, communications and administration, fees are collected from members. No facilities/benefits are provided such as recreation, etc. by the applicant. The applicant also sends fees to International Institution at USA for service activities and international administration.
Applicant further sends fees to its District Clubs.
It was stated that a separate administration account is maintained by the club, wherein sum recovered from all members for using the same for meetings and other petty administrative expenses and also include expenses for location and light refreshments.
The admin account is managed as if it is purely an agent of the members and no actual service if extended to the members.
Applicant maintains 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 no amount is utilized for administration purposes.
Advance ruling is sought about taxability or otherwise under the Act, of contributions received from the members in the Administration Account for expending the same for the weekly and other meetings and other petty administrative expenses.
Observations and Findings
Bench stated that in view of Section 7 of the CGST Act, 2017, the applicant society and its members were distinct persons and the fees received by the applicant, from its members was nothing but consideration received for supply of goods/services as a separate entity. Therefore, the applicant has to pay GST on the said amounts received from its members.
Contributions from the members, recovered for expending the same for the weekly and other meetings and other petty administrative expenses incurred including the expenses for the location and light refreshments, amounts to or results in a supply.
Authority expressed that the impugned activities performed by the applicant for the welfare activities of its members which includes meetings with food and refreshments, etc. is a service rendered by the applicant to its members as per the definition of term ‘services under Section 2(102) of the CGST Act.
Clause (e) of Section 2(17) of the CGST makes it clear that the activity of providing facilities or benefits by an association to its members for a subscription is a business under GST Act. Hence the transactions between the association and its members is a service.
“Member and Club are two distinct persons and hence, any activities and transactions between them will be supply between separate/distinct persons.”
In view of the above discussion, it was held that the amount collected as membership subscription and admission fees from members is liable to GST as supply of services.[Rotary Club of Bombay Queen City, In Re., GST-ARA-19/2020-21/B-96, decided on 22-11-2021]