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2019 (11) TMI 477 - AAAR - GSTRequirement of registration - Association of persons - principle of mutuality - scope of supply - amount collected by individual lions clubs and lions districts is for convenience of lions members and pooled together only for paying meeting expenses and communication expenses - amount so collected is deposited in a single bank account - there is no furtherance of business in this activity and neither any services are rendered nor are any goods being traded - challenge to AAAR decision - condonation of delay in filing appeal. HELD THAT - The appellant was prevented by a sufficient cause from presenting the appeal within period of thirty days from the receipt of the said ruling of AAR and accordingly allow the appellant to present the appeal within a further period of 30 days in terms of proviso to sub section 2 of section 100 of the CGST Act 2017. Merits of the case - Whether the Clubs or Associations and the members thereof can be considered as distinct persons or not? - HELD THAT - We are only concerned with the element of service, if any, rendered by the club to its members against some consideration, which may be in the form of the entrance fee or membership fee. Therefore, the contention made by the Respondent with regard to the principle of mutuality to establish their claim that the club and its member are not distinct entity is not tenable in so far as taxability in the GST regime is concerned. Whether the activities, undertaken by the Respondent by way of organizing the Leadership program exclusively for their Lion members, can be considered as service or not? - HELD THAT - It is pertinent to note that these Leadership Programs are conducted only for the Lion members. Non-Lion members are not allowed to participate in such programs. Thus, by doing so, the Respondents have rendered activity for the benefit of its members against the membership fee - Therefore, the activity of the Respondent in as much as they are conducting the Leadership Program exclusively for the Lion club members can clearly be considered as service being provided by the Respondent to its members. Whether the fee collected by the Respondent i.e. the Lions Club from its members in the form of entrance fee and annual membership fee can be treated as consideration or not? - HELD THAT - The membership fee collected by the Club from its members is not only meant for meeting the administrative expenses, but is also towards organising the Leadership Program for the direct or indirect benefits of the members. Any Leadership Skill along with other skills, imparted to any Lion member is not restricted or limited to any particular project, but the overall impact of such qualities developed in any person stays for his entire life span and the benefits accrued out of such skills will undoubtedly go much beyond the Projects undertaken by the Lions Club. Thus, any membership fee collected by the Lions Club from its members will definitely be understood as consideration as the same has been paid for the supply of services. Whether the transaction between the Respondent i.e. Lions Club and its members can be construed as supply or not? - HELD THAT - On perusal of the above definition of business, it can clearly be concluded that the provision of the leadership program by the Lions Club for the benefit of its members will come under the scope of business - Thus, it has been established that the supply of the services in the form of organising Leadership Program exclusively for Lion members has been made in the course of business only. It is believed that 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. Therefore, provision by club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members will surely attract GST irrespective of the fact that such club is not set up with the objective of providing any goods or service to its members. Hence, the observation of AAR does not hold any legal ground. The ruling made by AAR is set aside and subsequently it is held that Lions Club of Poona Kothrud, on account of the activities undertaken by them, is liable for taking registration for discharging their GST liability.
Issues Involved:
1. Distinct Persons: Whether the Clubs or Associations and the members thereof can be considered as distinct persons. 2. Nature of Activities: Whether the activities undertaken by the Respondent by way of organizing the Leadership program exclusively for their Lion members can be considered as service. 3. Consideration: Whether the fee collected by the Respondent in the form of entrance fee and annual membership fee can be treated as consideration. 4. Supply: Whether the transaction between the Respondent and its members can be construed as supply. Issue-wise Detailed Analysis: 1. Distinct Persons: The judgment examined whether the Club or Association and its members can be considered distinct persons under the CGST Act, 2017. The definition of "person" under Section 2(84) includes an association of persons or a body of individuals. The Lions Club, being an association of persons, qualifies as a "person," and its members, being individuals, are also "persons." Thus, the Club and its members are distinct persons. This was also the position under the Finance Act, 1994, where an unincorporated association and its members were treated as distinct persons for service tax purposes. The principle of mutuality cited by the Respondent, based on Income Tax rulings, does not apply to GST issues. 2. Nature of Activities: The judgment evaluated whether organizing Leadership programs exclusively for Lion members constitutes a service. The Respondent organizes programs covering management, communication, executive, and leadership skills, benefiting the members who pay the subscription fee. These programs are exclusively for Lion members, indicating that the Respondent provides a service to its members. The definition of "services" under Section 2(102) of the CGST Act, 2017, is broad and includes any activity other than goods, money, and securities. Thus, the activities undertaken by the Respondent are services provided to its members. 3. Consideration: The judgment considered whether the fee collected by the Respondent in the form of entrance fee and annual membership fee can be treated as consideration. The definition of "consideration" under Section 2(31) of the CGST Act, 2017, includes any payment made in respect of the supply of goods or services. The membership fee collected by the Club is not only for administrative expenses but also for organizing Leadership programs for the benefit of the members. Therefore, the membership fee is considered as consideration for the supply of services. 4. Supply: The judgment analyzed whether the transaction between the Respondent and its members can be construed as supply under Section 7 of the CGST Act, 2017. The term "supply" includes all forms of supply of goods or services made for a consideration by a person in the course or furtherance of business. The membership fee collected by the Club satisfies the first condition of being a consideration. The second condition, whether the supply is made in the course or furtherance of business, is also met. The definition of "business" under Section 2(17) includes the provision of facilities or benefits to members by a club for a subscription or consideration. Thus, the activities of the Lions Club fall under the scope of business, and the transaction between the Club and its members is a supply, attracting GST. Conclusion: The Appellate Authority set aside the ruling made by the Advance Ruling Authority, holding that the Lions Club of Poona Kothrud is liable for GST registration and compliance. The Club's activities, including organizing Leadership programs for its members, constitute a supply of services for consideration in the course of business, thereby attracting GST.
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