2020 (6) TMI 627 - AAAR - GST

Levy of GST - Supply of services or not - amount collected as membership subscription and admission fees from members - Input tax credit of the tax paid on the Banquet and Catering services for holding members meetings and various events. HELD THAT - In the absence of any mechanism to treat the appellant and its members as separate persons the said service does not tantamount to supply u/s 7 of the CGST Act, 2017, GST is not leviable on membership fees collected by the appellant from its members. Whether the amount collected as membership subscription and admission fees from members is liable to GST? - HELD THAT - It appears that the Club Association does not provide only Social Services as an NGO, but also have other functions relating to Personal Functions which clearly amounts to furtherance of business. In lieu of consideration received as membership fees, admission fees and subscriptions are taxable as supply of services under GST. So, prima facie there appears a levy of GST. If receipts are liable to GST, can the club claim input tax credit of the tax paid on banquet and catering services for holding members meetings and various events? - HELD 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, we conclude that 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 - Since, it has been held herein above that impugned activities of the Appellant will not be construed as supply, question regarding the availment of ITC on the input services like catering services, banquet services, etc. does not arise. The amount collected as membership subscription and admission fees from members is not liable to GST as supply of services.

Issues Involved:
1. Taxability of membership subscription and admission fees collected by the club from its members under GST.
2. Eligibility to claim Input Tax Credit (ITC) on banquet and catering services for holding members' meetings and events.

Issue-wise Detailed Analysis:

1. Taxability of Membership Subscription and Admission Fees:

The primary issue addressed in this judgment is whether the membership subscription and admission fees collected by the club from its members are liable to GST as a supply of services.

Detailed Submissions by the Appellant:
- The appellant argued that the club operates on the principle of mutuality, meaning the club and its members are not distinct entities. Therefore, contributions from members should not be considered as consideration for services.
- The appellant emphasized that the fees collected are solely for covering administrative expenses and not for any commercial benefit or profit.
- The appellant cited various legal precedents and the concept of mutuality from both Indian and foreign jurisprudence to support their argument that the club and its members are the same entity, and hence no taxable supply occurs.
- The appellant also referenced the recent Supreme Court judgment in the case of Calcutta Club Limited, which upheld the principle of mutuality and stated that services provided by a club to its members do not constitute a taxable supply.

Respondent's Submissions:
- The respondent argued that the club provides various benefits to its members, such as professional and recreational activities, which should be considered as furtherance of business.
- The respondent highlighted that the club charges fees for membership and admission, which are used for activities that benefit the members, thus constituting a taxable supply.

Appellate Authority's Findings:
- The authority examined the scope of the term "supply" under Section 7 of the CGST Act, 2017, which includes all forms of supply of goods or services for a consideration in the course or furtherance of business.
- The definition of "business" under Section 2(17) of the CGST Act, 2017, was also considered, which includes the provision of facilities or benefits by a club to its members.
- The authority observed that the club does not provide any specific facilities or benefits to its members in return for the membership fees. The fees collected are used solely for administrative expenses and meetings.
- It was concluded that the club is not engaged in any business as defined under Section 2(17) of the CGST Act, 2017, and therefore, the activities do not qualify as a supply under Section 7(1) of the CGST Act, 2017.

Conclusion on Taxability:
- The authority held that the amount collected as membership subscription and admission fees from members is not liable to GST as a supply of services.

2. Eligibility to Claim Input Tax Credit (ITC) on Banquet and Catering Services:

The second issue addressed is whether the club can claim ITC on the tax paid for banquet and catering services used for holding members' meetings and events.

Detailed Submissions by the Appellant:
- The appellant argued that if the membership fees are considered taxable, then ITC should be available for the banquet and catering services as these are used for providing taxable composite supplies to members.
- The appellant referenced Section 17(5) of the CGST Act, 2017, which allows ITC on food and beverages if used as an element of a taxable composite or mixed supply.

Respondent's Submissions:
- The respondent argued that Section 17(5)(b) of the CGST Act, 2017, restricts ITC on food and beverages, outdoor catering, and other specified services unless used for making an outward taxable supply of the same category or as an element of a taxable composite or mixed supply.

Appellate Authority's Findings:
- Since the authority concluded that the membership fees collected by the club do not constitute a taxable supply, the question of availing ITC on banquet and catering services does not arise.

Conclusion on ITC:
- The authority held that the issue of availing ITC on banquet and catering services is irrelevant as the membership fees are not taxable under GST.

Order:
- The authority set aside the rulings pronounced by the Advance Ruling Authority (AAR) and held that the amount collected as membership subscription and admission fees from members is not liable to GST as a supply of services.

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