9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (4) TMI 1112 - AAR - GSTLevy of GST - Supply of services or not - Principles of mutuality - amount collected as membership subscription fees paid by the members of the applicant towards facilities provided by the applicant - amount collected as infrastructure development fund for the development and maintenance of the facilities provided by the applicant - HELD THAT - Finance Act, 2021 has over ruled what the Courts have held till now and has countered the Principle of Mutuality by way of Explanation which states that the members or constituents of the club and the club are two separate entities and persons for the purpose of Section 7 of CGST Act, 2017 which defines Supply - by virtue of Section 1 of Finance Act, 2021, the amendment brought in Section 7 of CGST Act, 2017 by way of Section 108 of Finance Act, 2021, will only come into effect on the date when Central Govt notifies the same and then the same will be notified with the corresponding amendments passed by the respective States and Union territories in respective SGST/ UTGST Act. Thus, unless the amended Section 7 of CGST Act, 2017 is notified, the applicant is not liable to pay GST on subscription fees and Infrastructure development fund collected from the members as per the Hon'ble Supreme Court judgment in the case of STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. 2019 (10) TMI 160 - SUPREME COURT - application allowed.
Issues Involved:
1. Liability of GST on membership subscription fees. 2. Liability of GST on the infrastructure development fund. Issue-wise Detailed Analysis: 1. Liability of GST on Membership Subscription Fees: The applicant, a non-profit club, sought an advance ruling on whether the membership subscription fees collected from its members are liable as a supply of service under GST. The applicant referenced the Supreme Court judgment in State of West Bengal vs Calcutta Club to argue that the doctrine of mutuality applies, meaning the club and its members are not distinct entities, and thus, such fees are not exigible to service tax under the Finance Act, 1994. The applicant also cited other judgments, including Ranchi Club Ltd vs Chief Commissioner of Central Excise and Service Tax and Sports Club of Gujarat Ltd vs Union of India, which supported the mutuality principle and held that services provided by clubs to their members are not taxable as there is no existence of two separate legal entities. During the personal hearing, the applicant reiterated these arguments. The Authority for Advance Rulings (AAR) acknowledged the Supreme Court judgment in the Calcutta Club case, which supports the applicant's stance. However, the AAR noted that Section 108 of the Finance Act, 2021, amended Section 7 of the CGST Act, 2017, to clarify that transactions between a club and its members are deemed to be between two separate persons, thus countering the mutuality principle. Despite this amendment, the AAR concluded that until the amendment is notified by the Central Government, the applicant is not liable to pay GST on membership subscription fees, following the Supreme Court's ruling. 2. Liability of GST on the Infrastructure Development Fund: Similarly, the applicant sought a ruling on whether the infrastructure development fund collected from members is liable as a supply of service under GST. The applicant argued that, based on the doctrine of mutuality and relevant Supreme Court and High Court judgments, such funds should not be subject to GST as they are collected from members for the development and maintenance of club facilities, and there is no transfer of property or service between distinct entities. The AAR considered these arguments and the relevant legal precedents. It acknowledged that the mutuality principle, as upheld by the Supreme Court in the Calcutta Club case, applies to the infrastructure development fund as well. However, the AAR also noted the retrospective amendment to Section 7 of the CGST Act, 2017, by the Finance Act, 2021, which deems transactions between a club and its members as between separate persons. The AAR concluded that until this amendment is notified, the applicant is not liable to pay GST on the infrastructure development fund collected from members, in line with the Supreme Court's judgment. Ruling: The Authority for Advance Rulings ruled that the applicant is not liable to pay GST on both the membership subscription fees and the infrastructure development fund collected from its members. This ruling is subject to the amendment to the CGST Act by Section 1 of the Finance Act, 2021, becoming effective upon notification by the Central Government.
|
