2025 (2) TMI 722 - AAR - GST

Levy of GST - services provided by clubs to its members - mutuality of interest - reliance placed on Supreme Court s decision in the case of State of West Bengal others vs Calcutta Club Limited 2019 (10) TMI 160 - SUPREME COURT which addressed service tax applicability in the erstwhile regime - violation of principles of natural justice - HELD THAT - Hon ble Apex Court in the case of State of West Bengal V/s Calcutta Club Limited ordered that service tax was not leviable on the services provided by a club to its member under erstwhile Service tax regime. Consequent to the said judgment to bring the services provided by the clubs to its members in the net of GST 39th GST council in their meeting dated 14.03.2020 recommended retrospective amendment in the GST Act so as to explicitly include the transactions and activities involving goods and services or both by to its members for cash deferred payment or other valuable consideration along with an explanation stating that for the purpose of this section an association or a body of persons whether incorporated or not as taxable supply w.e.f 01.07.2017. It is also proposed that such an association or a body of persons whether incorporated or not and member thereof shall be treated as distinct persons under section 7 (1) of the CGST Act. Consequently para 7 of Schedule II of the CGST Act is proposed to be deleted. GST laws expanded the scope of supply to tax supplies between the club/association and its members to overcome the principle of mutuality. The scope of supply clearly ascertains that supply made by a person registered under GST is exigible to GST if it falls under section 7(1) of GST Act - A retrospective amendment (w.e.f. July01, 2017) has been made vide Finance Act 2021 by inserting a new clause (aa) after clause (a) in Section 7 (1) of the CGST Act to widen the scope of term supply by including therein activities or transactions of supply of goods or services or both between any person (other than individual) to its members or constituents or vice versa for cash deferred payment or other valuable consideration. Consequently Para 7 of Schedule II of the CGST Act has been deleted retrospectively (w.e.f. July 1 2017) which was related to supply of goods by unincorporated associations or body of persons to a member thereof for cash deferred payment or other valuable consideration being activity/ transaction treated as supply of goods. Further an explanation is added to say that the person and its members or constituents shall be deemed to be two separate persons and overriding effect has been given to the said explanation over anything contained in any other law for the time being in force and even to the judgements of any Court Tribunal or any other authority. Thus the decision given by the Hon ble Supreme Court in State of West Bengal Ors.v. Calcutta Club Limited for erstwhile Service tax regime is no more applicable on account of specific overriding effect over judgments. Conclusion - The clause 7 (1) (aa) have been inserted and deemed to have been inserted w.e.f. 01.07.2017 by Finance Act 2021. Thus the Services provided by the Club to its members is taxable as per clause (aa) of sub-section (1) of Section 7 of the CGST Act 2017 w.e.f. July 01 2017.

ISSUES PRESENTED and CONSIDERED

The primary issue considered was whether GST is applicable to services provided by clubs to their members under the current GST regime, in light of the Supreme Court's decision in the case of State of West Bengal & others vs Calcutta Club Limited, which addressed service tax applicability in the erstwhile regime.

ISSUE-WISE DETAILED ANALYSIS

1. Applicability of GST on Services Provided by Clubs to Members

Relevant Legal Framework and Precedents:

The applicant, a registered club, sought clarity on the applicability of GST on services provided to its members, referencing the Supreme Court decision in the Calcutta Club case, which ruled that service tax was not applicable to incorporated clubs under the previous regime. The applicant argued that similar principles should apply under the GST regime.

Court's Interpretation and Reasoning:

The Authority for Advance Ruling (AAR) examined the legal framework under the CGST Act, specifically Section 7, which defines the scope of "supply" and includes activities between a person and its members. The AAR noted that the GST regime, through a retrospective amendment, explicitly includes transactions between clubs and their members as taxable supplies, overriding the mutuality principle upheld in the Calcutta Club case.

Key Evidence and Findings:

The AAR considered the retrospective amendment introduced by the Finance Act, 2021, which inserted clause (aa) in Section 7(1) of the CGST Act. This amendment clarified that transactions between clubs and their members are taxable, treating them as distinct persons for GST purposes.

Application of Law to Facts:

Based on the amendment, the AAR concluded that the services provided by the club to its members fall within the scope of taxable supply under the GST regime. The decision emphasized the legislative intent to tax such transactions, notwithstanding previous judicial interpretations under the service tax regime.

Treatment of Competing Arguments:

The applicant's reliance on the Supreme Court's decision was addressed by highlighting the specific legislative changes under the GST regime that counter the mutuality principle. The AAR clarified that the retrospective amendment effectively nullifies the applicability of the Calcutta Club decision to the GST regime.

Conclusions:

The AAR concluded that GST is applicable to services provided by clubs to their members, effective from July 1, 2017, as per the amended provisions of the CGST Act.

SIGNIFICANT HOLDINGS

The ruling established that the retrospective amendment to the CGST Act, introduced by the Finance Act, 2021, effectively overrides previous judicial interpretations regarding the non-applicability of service tax to incorporated clubs. The amendment clarifies that transactions between clubs and their members are taxable under the GST regime.

Core Principles Established:

The ruling reinforced the principle that legislative amendments can retrospectively alter the taxability of transactions, overriding prior judicial decisions. It also emphasized the distinct legal treatment of clubs and their members under the GST framework.

Final Determinations on Each Issue:

The AAR ruled that GST is payable on services provided by clubs to their members, confirming the applicability of the amended provisions of the CGST Act.

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