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.

-        By Ronak Tyagi