2022 (2) TMI 1103 - AAR - GST

Classification of supply - supply or goods or supply of services - Requirement of registration of petitioner - amount collected by rotary is pooled together only for the sole purpose of charity and humanitarian activities for the most needed ones and requisite meeting and administration expenses without any profit motive - no furtherance of business in this activity and neither any services are rendered nor are any goods being traded - determination of liability to pay tax on any goods or services or both - HELD THAT - Sub-section (aa) has been inserted vide Notification no.39/2021-C.T dt.21.12.21 which is brought into force on 01.01.2022 with retrospective effect from 01.07.2017. Hence the activities performed by a person other than an individual to its members for a consideration is a supply as per the scope of this section. In the explanation provided it has been clarified that the members and the person i.e. the association shall be deemed to be two separate person and the supply of activities shall be deemed to take place from one such person or another and hence is a supply liable to be taxed - the activities rendered by the applicant to its members for which the membership fees collected forms the consideration is a supply and is liable to be taxed. Once it is held that the applicant and it's members are distinct and that the membership fee collected from its members is found taxable, they provide taxable service and are required to be registered under the CGST Act, 2017 subject to the exceptions available with regard to the monetary limit for such registration. Whether the activities rendered by the applicant, which they term as charitable etc., amount to supply? - manner of determination of tax liability - HELD THAT - In the present case, the applicant had furnished details for the activities already done in the yester years. During the Personal hearing held on 21.12.21, the applicant was informed that the activities pertained to the years 2017-18 and 2018-19, which have been completed on which ruling cannot be extended by this authority under Section 95 of the GST Act. The authorized representatives accepted the fact. Hence this authority is constrained in considering this question on merits. Therefore no ruling is extended in respect of this question as the same is not related to the activities being undertaken or proposed to be undertaken. Whether the membership fees collected by the applicant from their Members is subject to tax? - HELD THAT - As the activities rendered by the applicant to their Members is a supply to its constituents/members and they have to be registered. With respect to the question of whether specific activities listed by them and performed by the applicant are liable to tax, it has been found that the activities so rendered by the applicant are pertaining to the previous years and they have been rendered complete. Hence the question is found to be beyond the scope of Section 95(a) of the Act and is not answered. The GST liability on all the amounts collected other than Membership fees is not answered as the details relating to the said amounts was not furnished.

Summary

Issues Involved:
1. Requirement of GST registration for the applicant.
2. Taxability of membership fees collected by the applicant.
3. Manner of determining the liability to pay tax on goods or services provided by the applicant.

Detailed Analysis:

1. Requirement of GST Registration:

The applicant, Rotary District 3231, argued that the amounts collected are solely for charity and humanitarian activities without any profit motive and thus do not constitute a business. They referenced the definition of "persons" under Section 2(84) of the CGST Act, 2017, asserting there is no deeming fiction to treat associations and members as different persons. Therefore, they claimed the key condition for taxing a transaction under Section 7(1)(a) is not satisfied.

However, the judgment highlighted that under Section 7 of the CGST Act, 2017, "supply" includes activities made for consideration in the course or furtherance of business. The definition of "business" under Section 2(17) includes the provision of facilities or benefits by an association to its members for a subscription or other consideration. Hence, activities like organizing events and seminars for members are considered business activities. Consequently, if the membership fees collected exceed the threshold limit, registration under GST is required.

2. Taxability of Membership Fees:

The applicant contended that the membership fees collected should not be taxed as the association and its members are not distinct persons. However, the judgment referenced the amended Section 7(1)(aa) effective from 01.01.2022, which clarifies that activities by an association to its members for consideration are deemed to be supplies. The explanation provided states that the association and its members are considered separate persons, and the supply of activities between them is taxable.

Thus, the membership fees collected by the applicant from its members are considered taxable supplies under Section 7(1)(aa) of the CGST Act, 2017. As such, the applicant is required to register under the GST Act and pay applicable GST on these fees.

3. Determination of Tax Liability:

The applicant did not furnish detailed documents regarding the amounts collected and the specific activities undertaken. The judgment noted that the applicant's activities, such as seminars and service projects, were already completed in previous years (2017-18 and 2018-19). Under Section 95 of the CGST Act, 2017, advance rulings can only be provided for activities being undertaken or proposed to be undertaken. Since the activities in question were already completed, the authority could not extend a ruling on them.

The judgment concluded that the specific activities listed by the applicant pertain to past years and are beyond the scope of Section 95(a) of the Act. Therefore, no ruling was provided on these activities. Additionally, due to the lack of details on other amounts collected, no ruling was extended regarding their GST liability.

Ruling:

1. The applicant is required to register under the GST Act as they are providing taxable supplies.
2. The membership fees collected by the applicant are taxable under Section 7(1)(aa) of the CGST/TNGST Act, 2017.
3. No ruling is extended on other amounts collected due to insufficient details, and no ruling is provided for activities already completed in previous years.