2020 (2) TMI 895 - AAAR - GST

Taxability - contributions received from the members in the Administration Account for expending the same for the weekly and other meetings and other petty administrative expenses - club and association services - principles of mutuality - classification of supply - supply of goods or supply of services - HELD THAT - It is observed that the Appellant is not providing any specific facility or benefits to its members against the membership subscription charged by it, as the entire subscription amount is spent towards meetings and administrative expenditures only. Thus, the Appellant is not doing any business as envisaged under section 2(17) of the CGST Act, 2017. Once it has been established that the Appellant is not doing any business in terms of section 2(17) of the CGST Act, 2017, it can be deduced that activities carried out by the Appellant would not come under the scope of supply as envisaged under section 7(1) of the CGST Act, 2017. The impugned activities of the Appellant to be supply, then the membership fee collected by the Appellant, which is purely in the nature of a reimbursement for the meetings and administrative expenditures incurred by the Appellant to sustain and propagate their inherent objectives and programs, would be subject to the double taxation as the amount spent towards the meetings and administrative expenditures is already subjected to GST at the hands of the suppliers of these input services or goods used in the meetings, events and other administrative functions of the Appellant. Thus, doing so would clearly be against the legislature s intention of the formulation of GST, which certainly does not embrace the idea of double taxation - Once the core issue regarding the taxability of the membership subscription fee has been decided, the answers to the other issues/questions posed by the Appellant vide their advance ruling application will follow and the same do not warrant separate discussions. The amount collected as membership subscription and admission fees from members is not liable to GST as supply of services.

Issues Involved:
1. Whether contributions from members for administrative expenses amount to a supply under GST.
2. Classification of the contributions as supply of goods or services.
3. Determination of the applicant as a taxable person under GST.
4. Responsibility for GST payment given the changing office bearers.
5. Whether collection and spending of funds constitute a supply.
6. Classification of such supply as goods or services.

Detailed Analysis:

Issue 1: Contributions from Members as Supply
The Appellate Authority examined whether contributions collected from members for administrative expenses amount to a supply under GST. The Authority concluded that these contributions do not constitute a supply as defined under Section 7 of the CGST Act, 2017. The reasoning was that the contributions are used solely for administrative expenses without providing any specific facilities or benefits to members, thus not qualifying as a business activity under Section 2(17) of the CGST Act.

Issue 2: Classification as Supply of Goods or Services
Since the Authority determined that the contributions do not constitute a supply, the question of classifying them as goods or services became moot. The contributions are not subject to GST, hence no further classification is required.

Issue 3: Determination as a Taxable Person
The Authority ruled that the appellant, Rotary Club, is not a taxable person under the provisions of the GST Act because the activities do not qualify as a business. The membership fees collected are purely for administrative purposes and do not involve any commercial transactions or provision of services to members.

Issue 4: Responsibility for GST Payment
Given the conclusion that the activities do not constitute a supply and the appellant is not a taxable person, the question of responsibility for GST payment by changing office bearers is irrelevant. The Rotary Club itself is not liable for GST.

Issue 5: Collection and Spending of Funds as Supply
The Authority found that the collection and spending of funds under a common pool for administrative purposes do not constitute a supply. This is because there is no commercial consideration or provision of services involved, aligning with the principle of mutuality where funds are collected and spent back on members without any profit motive.

Issue 6: Classification as Supply of Goods or Services
As the contributions do not constitute a supply, there is no need to classify them as either goods or services. The funds are collected and utilized solely for administrative expenses, which do not fall under the purview of supply under the GST Act.

Grounds of Appeal:
The appellant argued that the application for advance ruling should have been deemed accepted due to the delay in pronouncement beyond the statutory period of 90 days as per Section 98(6) of the CGST Act. They also contended that the principle of mutuality applies, and there is no commercial consideration or business activity involved. The contributions are purely for administrative purposes without any provision of facilities or benefits to members.

Discussions and Findings:
The Authority reviewed the facts, documents, and submissions, concluding that the membership fees collected are not liable to GST. The contributions are used for administrative expenses without providing any specific benefits to members, thus not qualifying as a supply under GST. The Authority emphasized that taxing these contributions would result in double taxation, which is against the legislative intent of GST.

Order:
The Appellate Authority set aside the ruling of the AAR and held that the amount collected as membership subscription and admission fees from members is not liable to GST as supply of services.

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