2019 (7) TMI 1281 - AAR - GST

Levy of GST - consideration paid as subscription or contribution towards recurring or capital expenses or reimbursement to National Institute of Bank Management (NIBM) - Whether 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 leviable to GST? HELD THAT - In the subject case, the applicant receives certain amount of contribution from public sector banks and RBI to cover certain recurring and non-recurring expenses incurred by them. As per Memorandum of Association, the expenses are incurred for promotion and conducting of research in matters 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, 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. There is a supply of taxable services by the applicant which are performed for consideration (in this case contributions received for performing activities mentioned in the MOA) received in furtherance of their business. As per Section 2 (17) (e) business includes 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. Here, the applicant is a society formed by the RBI and various Public Sector Bank/s and are providing services mentioned in para 5.6 above to their member banks. Therefore it can safely be said that they are receiving consideration (contribution) for supply of taxable services rendered in furtherance of their business. Principal of Mutuality - HELD THAT - We do not agree with the applicant s contention that their activity would be covered under the Principal of Mutuality i.e. No man can trade with himself; he cannot make, in what is its true sense or meaning, taxable profit by dealing with himself . This assumption is made by the applicant considering that they and the various Public Sector banks and RBI are one and the same - we are firmly of the opinion that the contributions received by the applicant from the RBI and other Public Sector Banks is nothing but consideration for the entire gamut of services supplied by them as mentioned in para 5.6 supra and GST is payable on such contributions received.

Summary

Issues Involved:
1. Whether consideration paid as subscription or contribution towards recurring or capital expenses or reimbursement to National Institute of Bank Management (NIBM) by its members (being Banks) is leviable to GST.

Issue-Wise Detailed Analysis:

1. Nature of Contributions and Their Taxability Under GST:
The applicant, National Institute of Bank Management (NIBM), sought an advance ruling on whether the contributions received from its members (RBI, SBI, and other public sector banks) towards recurring and non-recurring expenses are subject to GST. NIBM contended that these contributions are not "consideration" for any services provided and therefore should not be subject to GST. They argued that the contributions are akin to donations or grants and are not linked to any specific service provided to the contributing banks.

2. Definition and Scope of "Consideration" and "Supply" Under GST:
The ruling examined the definition of "consideration" under Section 2(31) of the GST Act, which includes any payment made in respect of the supply of goods or services. The term "supply" under Section 7 of the GST Act includes all forms of supply of goods or services made for a consideration in the course or furtherance of business. The ruling noted that the contributions received by NIBM are for carrying out specific activities such as research, training, and consultancy, which are services provided to the member banks.

3. Analysis of the Principle of Mutuality:
NIBM argued that the contributions should be exempt under the principle of mutuality, which posits that a person cannot make a profit from themselves. However, the ruling clarified that under GST law, NIBM and its member banks are distinct entities. The contributions are made for specific services, and there is a clear supply of services from NIBM to its members, which constitutes a taxable event under GST.

4. Comparison with Similar Cases:
The ruling compared the case with similar advance rulings such as the Banking Codes and Standards Board of India (BCSBI), where contributions from member banks were considered as consideration for services provided and thus subject to GST. The ruling found that the activities of NIBM are similar in nature to those of BCSBI, where the contributions are directly linked to the services provided.

5. Observations and Conclusion:
The ruling concluded that the contributions received by NIBM from its member banks are indeed consideration for the services provided by NIBM. These services include research, training, and consultancy, which are performed in furtherance of NIBM's business objectives. Therefore, the contributions are subject to GST.

Order:
The Authority for Advance Ruling held that the contributions received by NIBM from its member banks are subject to GST as they are considered as consideration for the services provided by NIBM. The ruling was made in the affirmative, confirming that GST is applicable on such contributions.