Service tax on Clubs and Association - reg. - Service Tax - F.No. 137/50/2008-CX.4

Service tax on Clubs and Association - reg. F.No. 137/50/2008-CX.4 Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs Dated : March 5, 2008 Subject : Service tax on Clubs and Association - reg. Commissioner of Service Tax, Delhi has recently detected a case of non-payment of service tax, of Rs. 2.92 crore under taxable service, namely, 'club or association service', by a reputed club. The investigation shows that the said club had not paid any service tax since the said service became taxable w.e.f. 16.06.2005. This case shows that the level of tax compliance for this taxable service is very low and even some of the reputed clubs and associations having high membership fees as well as number of members, have not registered themselves and have not paid the tax due. 2. It is understood that one of the pleas taken by such clubs and associations is that club provides services to its own members only (or to the guests of a member), and therefore, the service provided by the club (which consists of the members), and therefore, the service provided by the club (which consists of the members) is in the nature of self-service and is not chargeable to tax. This plea is legally unsustainable. In fact, the same was clarified in 2006, when an Explanation was added to section of the Finance Act, 1994, which reads as follows, - Explanation - For the purposes of this section, taxable services include any taxable service provided or to be provided by any unincorporated association or body of persons to a member therefore, for cash deferred payment or any other valuable consideration. 3. Another argument put forth is that the activities of such clubs and associations are 'charitable' in nature. It may be recalled that the meaning of the term 'charitable' was explained vide circular No. 84/2/2006-ST dated 19.9.2006, and therefore, the claims of the taxpayers are needed to be examined in that context. 4. In view of the foregoing, the undersigned is directed to state that the Board has desired that the tax payments made by all prominent clubs and associations should be verified immediately, and those not found to be tax compliant, should be contacted for recover, of the short-paid/ unpaid tax. It must be ensured that tax dues are recovered during the current financial year itself. 5. This issues with the approval of Member (Service Tax). (Gautam Bhattacharya) Commissioner (Service Tax)