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TMI Blog2019 (7) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... ke to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 02. FACTS AND CONTENTIONS - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- * "Rotary Club of Mumbai Queens Necklace (hereinafter referred to as "Rotary" or "Club") is an un-incorporated association of individuals. The club is affiliated to Rotary International, a worldwide organization with 520+ districts, 35000+ clubs and 1.2 million plus members. The object of Rotary is to encourage and foster the ideal of service. * Advance Ruling Application is being filed by the club i.e. Rotary Club of Mumbai Queens Necklace. * For the sake of brevity, the structure of Rotary is explained as under: a) Clubs - Rotarians are members of Rotary clubs, which in turn belong to the global association Rotary International (RI). Ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meetings and communication. The receipts majorly comprise of: a) Fees from members which in essence is contribution towards yearly expenses. The contribution from new members is collected on pro rata basis rounded to quarter/ half year. b) One time admission Fees from New Members (other than who are or were Rotarians). * The expenses are in the form of: a) Meeting Expenses b) Fees and contributions to District or Secretariat of Rotary c) Other Administration expenses like printing, stationery, audit fees etc. * The amounts collected by way of fees are only pooled together and it is not expected to generate any surplus. Club has not been formed to give any facilities or services to its members. The members gather under the umbrella of the club to perform socially relevant activities. * Club in normal parlance is understood to provide goods or services to its members such as recreation, sports etc. However Rotary Club does not provide any facilities or benefits in terms of goods or services to the members. * Copy of the Constitution Document/charter is enclosed herewith at Annexure A for reference. The activities relating to receiving donation etc. is carried out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hole society Ltd. V. Commr. Agr of I. T. (1948) 16 ITR 270 (PC) = 1948 (4) TMI 2 - PRIVY COUNCIL, there are three conditions stipulated by the judicial committee, the existence of which establishes the doctrine of mutuality: a) The identity of the contributors to the fund and recipients from the fund. b) The treatment of the company, though incorporated as a mere entity for the convenience of the members and policyholders, in other words, as an instrument obedient to their mandate, and c) The impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expelled or returned to themselves. 2) The Honorable court has also discussed the principles of mutuality in the case of CIT vs, Bankimpur Club Ltd. = 1997 (5) TMI 392 - SUPREME COURT as follows: "It should be noticed that in the case of a mutual society or concern (including a member's club), there must be complete identity between the class of contributors and the class of participators. The particular label or form, by which the mutual association is known, is of no consequence." * Supply: 1) Section 9 of the CGST Act, 2017 stipulates the taxable event for l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available ; and (C) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied; A harmonious reading of both the above definitions provides that where a consideration is involved in a transaction, the recipient is the "person" who pays the consideration to the supplier. Hence, two different persons have been envisaged in the law to tax a transaction as a supply made for a consideration. The term person is defined in section 2(84) of the CGST Act, 2017 to include an association of persons or a body of individuals, whether incorporated or not, in India or outside India. Further, Schedule II of CGST Act, 2017 enumerates activities which are to be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members be considered as related person? Explanation to section 15 of the act explains the term related person as follows: For the purposes of this Act,- (a) persons shall be deemed to be "related persons" if-- (i) such persons are officers or directors of one another's businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; (iv) any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or (viii) they are members of the same family, (b) the term "person" also includes legal persons; C) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. On perusal of the above definition we can conclude that there must be more than one person who can be considered as related as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e wherein the Advance Ruling authorities in identical scenario have held that "There being no supply qua the fees received, there arises no occasion for us to visit the definition of "Supply" under the GST Act. The applicant club as per the facts put up before us does not render any "Supply" for the purpose of GST Act." 3. As discussed in the course of hearing, the club invites various speakers (for which no considerations paid to them or charged to members) in its meetings. The details of speakers at some of the meetings are as under: Sr. No. Date of Meeting Speaker Topic 1 9/7/2018 Mr. Arun Shourie Life Experiences 2 22/10/2018 Mrs. Leena Asher Education Systems 3 19/11/2018 Enthu Suresh Motivational Speaker 4 18/2/2019 Mr. Ujwal Nikam LIFE EXPERIENCES We reiterate that the said activities are not for transforming members into leaders generally but are for members to become effective while carrying out various social service activities. The Rotary could not have assisted in eradication of polio or various such other massive programs unless the members got together and learnt the art of team work and working with Government and semi government bodies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. Bill Gates of Microsoft or Rajashree Birla has been contributing large sums of money to Rotary for eradication of polio programs worldwide including in India and this is not possible unless the members connect with other members and corporates. The speakers who come to Rotary also support the activities of Rotary by spreading the good work to others. b) It further appears that in Rotary Global Rewards, wherein the members get several benefits by the way of offers and discounts on various products and services. Rotary Global Rewards offers discounts on vehicle rentals, hotels, dining, and more. Products and services from companies around the world are being added every week. Rotary Club is not providing any discounts or facilities on its own account. The said discounts are provided by the respective companies. The said rewards are similar to Credit Card reward points provided by the Credit Card companies. There is no revenue or benefit to the club for the same. Such types of reward points are offered by companies for using their products or services and not any goods or services of the Club. It is not the objective of Rotary to seek rewards. However the various organisations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. The Club members meet at their own expenses for the said purpose. e) Input Tax Credit of banquet and catering services for holding members meetings and various event is not allowed u/s of CGST Act. As per the provisions of CGST Act, Input Tax credit of Food & beverages, outdoor catering is not allowed u/s except where such goods or services or both is used by a registered person for making as outward taxable supply of the same category of goods or services or both or as element of a taxable composite or mixed supply. The said services are definitely used by the club for its members and hence ITC for the same should definitely be allowed. We will be glad to provide any further details or documents your good office may require in this regard. We request your good office to kindly take on record the above submissions and consider the social cause of the club while determining the taxability of its collections from members." 04. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- "M/s. Rotary Club of Mumbai Queens Necklace having GSTIN no 27AAABR0643J1ZJ are registered with CGST Division III, Range -IV, Mumbai Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai Queens Necklace have not submitted the copies of Article 13 section 7 in their application. Therefore, in order to ascertain the responsibilities and privileges of the Committee and their members, the department searched the literature available on internet, it has come to department's notice that Rotary clubs are involved in two kind of activities:- i) Social Service Activities:- It is ascertained that M/s. Rotary Club of Mumbai Queens Necklace are into social services like all other Rotary clubs. Ex. Fighting diseases, Working towards education, etc. ii) Professional and Recreational Activities:- Along with Social services, the M/s. Rotary Club of Mumbai Queens Necklace is also involved in other activities for their members which are not related to social cause and are discussed below: a. Rotary club invites eminent personalities for guest lectures and guidance for the members to enhance their professional leadership and personal skills. Through regular meetings and events, the members of the Club will connect with other leaders towards changing the world and expand their leadership and professional skills. There are various articles on public domain like "Why Rotar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CGST Act, 2017 mentions various situations wherein ITC cannot be availed. The Section 17(5)(b) is reproduced is as under:- Section 17(5):- Not withstanding anything contained in Sub-Section (1) of section 16 and Sub-Section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (b) The following supply of goods or services or both :- i) Food & beverages, outdoor catering, beauty treatment. Health services, cosmetic & plastic surgery, leasing renting or hiring of motor vehicles, vessels or aircraft referrers to in clause (a) of clause (aa) except when used for the purpose specified there in, life insurance and health insurance. Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making as outward taxable supply of the same category of goods or services or both or as element of a taxable composite or mixed supply; ii) Membership of a club, health and fitness center iii) Travel benefits extended to employees on vacation such as leave or home travel concessions. Provided that the input tax c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax invoice no 166/18-19, 186/18-19 and 091/18-19 and schedules of the Balance sheets attached with the application by M/S. Rotary Club of Mumbai Queens Necklace, it is observed that M/s. Rotary Club of Mumbai Queens Necklace had arranged spouse events and spouse night expenses which clearly amounts to recreation activity and hence it falls under tax net. Hence on going through the above information, it appears that the services provided by the Club & Association 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 on the issue on above said issue. Through regular meetings and events, the members of the Club will connect with Other leaders towards changing the world and expand their leadership and professional skills. 1.2) 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? In this connection the undersigned is of opinion that According to Section 17 (5)(b) of CGST 2017 mentions various situations wherein ITC cannot be availed, we would like to draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essions Provided that the input tax credit in respect of such goods or services or both shall be available where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. In view of the above it is to state that the Club or association cannot claim input tax credit on the tax paid on catering and other such services. 05. HEARING Preliminary hearing in the matter was held on 27.02.2019. Sh. Parag Mehta, CA appeared, and requested for admission of application. Nobody from the jurisdictional Office appeared. The application was admitted and called for final hearing on 03.04.2019. Sh. Parag Mehta, C.A, appeared made oral and written submissions. Jurisdictional Officer Ms. Manisha Rode, Suptt., appeared and made written submissions. 05. OBSERVATIONS We have gone through the facts of the case, documents on record and submissions made by both, the applicant as well as the jurisdictional office. The applicant has raised the following questions: 1.1. The questions/ issues before Your Honor for determination is whether the amount collected as membership subscription and admission fees from members is liable to GST as supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its members". (D). "From the above inclusive definition of the term 'consideration' it can decisively be construed that the membership fee collected by the club from its members is not only meant for meeting administrative expenses, but is also towards organizing the Leadership Program for the direct or indirect benefits of the members. Any leadership skills along with other skills discussed supra, imparted to any lion member is not restricted or limited to any particular project, but the overall impact of such qualities developed in any person stays for his entire life span and the benefits accrued out of such skills will undoubtedly go much beyond the Project undertaken by the Lions Club. Thus, any membership fee collected by the Lions Club from its members will definitely be understood as 'consideration' as the same has been paid for supply of services" (E). The Lions Club has fulfilled both the conditions prescribed by Section 7 of the CGST Act; firstly that such supply is made by them in lieu of consideration and secondly, such supply has been made in the course or furtherance of business since the term business includes provision by club, association, society, or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in observance of the principles of Judicial discipline, we hold that the amount collected as membership subscription and admission fees from members is liable to GST as supply of services. Now we come to the second question raised by the applicant which is as follows; Question 1.2. If the above 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? Section 17 of the CGST Act, 2017 deals with Apportionment of Credit and blocked credit. The relevant clause (5)(b)(i) of Section 17 is reproduced as under:- Notwithstanding anything contained in Sub-Section (1) of section 16 and Sub-Section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (b) The following supply of goods or services or both:- i) Food & beverages, outdoor catering, beauty treatment. Health services, cosmetic & plastic surgery, leasing renting or hiring of motor vehicles, vessels or aircraft referrers to in clause (a) of clause (aa) except when used for the purpose specified there in, life insurance and health insurance. Provided that the input tax credit in res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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