Maharashtra AAR held that Membership, Subscription fees and other expenses paid to the Rotary club are not liable to GST
The present advance ruling was sought by M/s Rotary Club of Mumbai Western Elite, in respect of the following question.
The
amount collected by Rotary club is towards convenience of members and pooled
together for paying meeting expenses, communication expenses, RI per capita
dues, subscription fees to the Rotarian or Rotary regional magazine, district
per capita assessment and the same is deposited in single bank account. As
there is no furtherance of business in this activity and neither any services
are rendered nor are any goods being traded, whether the above transaction can
be considered as supply of goods or services to its Members under GST? The AAR
vide its Ruling dated December 11th, 2019 held that the said
transaction by the applicant to its members is a supply of goods/services and
is not liable to GST.
Submissions
of the Applicant:
The
Applicant would like to submit that there was no furtherance of any business of
benefits or facilities to the members. The applicant and its members are the
same because of principle of mutuality and they cannot be regarded as related
persons and therefore the transaction between them association and their
members will not be covered within the scope of supply w/s. 7 of the CGST Act,
2017.
Observations/Findings
of the Authority:
The
Authority observed that the facts of the Lion Clubs Case are similar to the
facts of applicant's case. Where the Maharashtra AAR held that since the amount
collected by individual Lions clubs and Lions district is for convenience of
Lion members and pooled together only for meeting expenses and
communication expenses and the same is deposited in single bank account, as
there is no furtherance of business in this activity and neither any services
are rendered nor are any goods being traded, said fee cannot be brought within
purview of GST.
Further,
various Courts and Tribunals have held that the club is for the benefit for the
members, club and members shall not be considered as different persons for the
purpose of levy of tax. Accordingly, no tax should be levied on the amount
collected by club from its members. Under Service Tax regime, Courts in several
cases held that in absence of deeming fiction, treating club/association &
its members as distinct person, service tax shall not be payable.
In
order to nullify the said decisions, w.e.f. 01.06.2012 clause (a) to
Explanation 3 to Sec. 65B provided that an unincorporated association or body
of persons, as the case may be and a member thereof shall be treated as
distinct persons. However, such deeming fiction is not provided under the
current GST regime. In view of the above submissions, it is evident that the
Applicant and its members are same. Hence, the key condition to tax a
transaction u/s. 7(1)(a), that supplier and recipient must be different, is not
satisfied.
Read
the full Order here.
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By Ronak Tyagi
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