2019 (8) TMI 819 - AAR - GST

Nature of activity - supply or not - classification of supply - supply of goods or supply of services - contributions from the members in the Administration Account, recovered for expending the same for the weekly and other meetings and other petty administrative expenses incurred including the expenses for the location and light refreshments - Principles of Mutuality - taxable person or not - person responsible under GST, as office bearers - collection of funds under common pool and spending back on the same said contributors, whether supply or not. HELD THAT - As per the definition of person under the GST Act, 2017, there are two persons namely, the applicant and the other person being the member of the applicant. Hence the club/organization and member are distinct entities. The GST law has given very wide connotation for services, which will cover any activity other than which involves goods, money and securities. Therefore the activity of the applicant in as much as they are striving to set high ethical standards in business and profession, recognition of worthiness of all useful occupations, dignifying each Rotarian's occupation as an opportunity to serve society, application of the ideal of service in each Rotarian's personal, business and community life, exclusively for their members can clearly be considered as service being provided by the respondents to its members. From the inclusive definition of the term 'consideration' it can decisively be construed that the membership fee collected by the club from members is not only meant for meeting administrative expenses, but is also towards setting high ethical standards in business and profession, recognition of worthiness of all useful occupations, dignifying each Rotarian's occupation as an opportunity to serve society, application of the ideal of service in each Rotarian's personal, business and community life, exclusively for their members. Thus, any membership fee collected by the applicant from its members will definitely be understood as 'consideration' as the same has been paid for supply of services . 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 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 - both the conditions stipulated for 'supply' under the GST Laws having been adequately fulfilled leads to the conclusion that transaction between the applicant its members are nothing but supply, and accordingly will attract GST. Under the GST Law, the intent or objective of any club or association is immaterial in so far as the leviability of GST is concerned. The amount collected as membership subscription and admission fees from members is liable to GST as supply of services.

Summary

Issues Involved:
1. Whether contributions from members for administrative expenses amount to a "supply" under GST.
2. Classification of such contributions as supply of goods or services.
3. Determination of the applicant as a taxable person under GST.
4. Identification of the liable person under GST when office bearers change annually.
5. Whether collection and spending of funds under a common pool constitute a "supply."
6. Classification of such collection and spending as supply of goods or services.

Detailed Analysis:

Issue 1: Contributions as Supply
The Authority examined whether contributions from members for administrative expenses, including weekly meetings and refreshments, constitute a "supply" under GST. The Authority concluded affirmatively, stating that the applicant and its members are distinct entities. The activities undertaken by the applicant, such as promoting ethical standards and community service among members, are considered services provided to members. The membership fees collected are seen as consideration for these services.

Issue 2: Classification as Goods or Services
Since the contributions were deemed to be a supply, the next question was whether this supply constitutes goods or services. The Authority classified it as a supply of services. The membership fees are paid for the services that the club provides to its members, including administrative support and organizing meetings.

Issue 3: Applicant as a Taxable Person
The Authority affirmed that the applicant is a taxable person under the GST Act, subject to the provisions of Section 22, which pertains to the threshold limit for registration. The applicant's activities fall under the definition of "business" as per Section 2(17) of the CGST Act, which includes the provision of facilities or benefits to members for a subscription or other consideration.

Issue 4: Liable Person Under GST
Regarding the liability for GST when office bearers change annually, the Authority clarified that the applicant itself is liable to pay GST, not the individual office bearers. The liability remains with the organization, ensuring continuity despite changes in office bearers.

Issue 5: Common Pool Collection as Supply
The Authority addressed whether the collection and spending of funds under a common pool for members' benefits constitute a "supply." It affirmed that such activities do constitute a supply. The funds collected are used to provide services to members, fitting the definition of "supply" under the GST Act.

Issue 6: Classification of Common Pool Activities
Finally, the Authority classified the collection and spending of funds under the common pool as a supply of services. The contributions are used to facilitate various activities and services for members, thus qualifying as services provided by the club to its members.

Conclusion:
The Authority concluded that the contributions from members for administrative expenses, including meetings and refreshments, amount to a supply of services under GST. The applicant is a taxable person, and the liability for GST rests with the organization, not the individual office bearers. The collection and spending of funds under a common pool also constitute a supply of services.