The Hon’ble AAR, Maharashtra held that club and its members are two distinct persons and the amount collected as membership subscription and admission fees from members are liable to GST as the supply of services. No ITC is available on the tax paid on banquet and catering services for holding members meetings and various events, as outward supply is not of the same category.
M/s Rotary Club of Mumbai Queens Necklace (“the applicant” or “Club”) is an un-incorporated association of individuals. The object of the club is to encourage and foster the ideal of service. The purpose of Club is to promote integrity, advance world understanding, and goodwill & peace through fellowship of leaders. The Club is a not for profit institution and it neither renders any commercial service to its members, nor does it render services to outsiders for a fee.
The Club collects membership fee and admission fee from existing members and new members respectively. The expenses are mainly in the form of meeting expenses, fees and contributions to district or secretariat of Club.
- Whether the amount collected as membership subscription and admission fees from members is liable to GST as a supply of services?
- If the above receipts are liable to GST, can the Club claim the Input Tax Credit (“ITC”) of the tax paid on banquet and catering services for holding members meetings and various events?
Applicant’s Interpretation of Law
In respect to Q. 1
On perusal of the definitions of a related person, it can be interpreted that, there must be more than one person who can be considered as related. As an association and its members are the same because of the principle of mutuality and hence they can’t be regarded as a related person.
Also, the club is not formed to provide any supply of goods or services to its members qua the fees received from them and hence there being no supply taking place. Since no supply takes place between Club and its members, no GST is applicable on membership fees so collected.
In respect to Q. 2
Section 17 (5) (b) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) bars ITC on food & beverages, outdoor catering except where such goods or services or both is used by registered person for making as outward taxable supply of the same category of goods or services or both or as element of taxable composite or mixed supply. The said services are definitely used by the club for its members and ITC must be allowed.
Observation of the AAR
In respect to Q.1
- Club and members are two distinct persons.
- The facts of the applicant are similar to facts of Lions Club of Poona, which was overruled by Appellate Authority and held that transaction of Lion Club was falling under the definition of term ‘Supply’.
In respect to Q.2
The applicant has only submitted that their services are used for their members and hence ITC for the same should be allowed. They have not given any evidence as to how:
- Their outward taxable supply is of the same category of goods or services or both.
- Their outward taxable supply is an element of a taxable composite or mixed supply.
The Hon’ble AAR, Maharashtra vide Order No. GST-ARA-118/2018-19/B-46 Mumbai, dated April 30, 2019 held that the amount collected as membership subscription and admission fees from members by Rotary Club is liable to GST as the supply of services. It further holds that the applicant is not entitled to ITC of the tax paid on banquet and catering services for holding members meetings and various events.