The Hon’ble AAR of Maharashtra holds that the consideration paid as subscription or contribution towards recurring or capital expenses or reimbursement or by whatever name called to National Institute of Bank Management (NIBM), a society registered under Societies Registration Act, 1860 by its members (being Banks) for its recurring and non-recurring expenses is chargeable to GST.
The National Institute of Bank Management (“the Applicant” or “NIBM”) is a registered society under the Indian Society Registration Act (XXI) of 1860 as an Academic cum Training Institute established by the Reserve Bank of India (“RBI”) in constitution with Government of India as an autonomous Apex Institute.
RBI, State Bank of India (“SBI”) & other Public Sector Banks (“PSBs”) were the members of Governing Board to whom, by rules of the society, the management of its affairs was entrusted. Further, the RBI, SBI & other PSBs in their capacity of promoters of the Institute, contribute an amount of ₹ 100.00 lakh, per annum, as subscriptions towards recurring expenses. Their entire CAPEX is also contributed at actuals by RBI, SBI & other PSBs in a certain ratio to ensure that the NIBM are not in deficit in regard to operations.
As per Memorandum of Association, the expenses are incurred for promotion and conducting research pertaining to the improvement of banking operations, pertaining to the maximum augmentation and effective deployment of banks’ resources including analytical and perspective studies of various sectors of the economy with a view to promoting national development. Further, to assist banking and financial institutions in matters such as designing measurement tests for employee selection, appraisal programs, conducting morale, productivity studies, streamlining organizational structure and to review, from time to time, the impact of educational, training and research activities and offer suggestions for filling the gaps in the banking and financial systems and to maintain liaison with banking and financial institutions.
Whether consideration paid as subscription or contribution towards recurring or capital expenses or reimbursement or by whatever name called to NIBM by its members (being Banks) for its recurring and non-recurring expenses is leviable to GST?
Applicant’s Interpretations of Law:
The applicant submitted that GST is not applicable on the contributions collected/received from the Public Sector Banks, because such contributions received cannot be held as ‘consideration as defined under the GST Act, since there is no supply on their part. Further, the applicant stated that there is no link or nexus between the amount received and the activities conducted by them; contributions received are meant for the charitable cause championed by the registered foundation, the Public Sector Banks do not receive any exclusive benefit in return for the contributions so made.
The applicant further stated that the PGDM course offered by NIBM is recognized under AICTE and hence, exempt under GST and for all the other above revenue generating activities, GST is levied on the fees collected by NIBM. Hence it is very clear that to receive the contributions as mentioned above, they must carry out the activities entrusted to them and these activities are nothing but supply of services by them, rendered in lieu of the receipt of contributions.
The Hon’ble AAR, Maharashtra vide Order No. GST-ARA-139/2018-19/B-75 dated June 25, 2019 held that-
- The applicant has fulfilled both the conditions prescribed by Section 7 of the CGST Act, firstly that such supply is made by them in lieu of consideration i.e contribution and secondly, such supply has been made in the course or furtherance of business since the term business includes provision by club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members.
- Therefore, the contributions received by the Applicant from the RBI and other PSBs is nothing but consideration for the entire gamut of services supplied by them as mentioned above and GST is payable on such contributions received.
Section 2(17)(e) of the CGST Act:
“(17) “business” includes––
(e) 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;”