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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 ..... eligible for such credit has not substantiated the same with evidentiary material - Hence we cannot accept their contention - the applicant, cannot claim input tax Credit on the tax paid on banquet and catering services. - GST-ARA-118/2018-19/B-46 - - - Dated:- 30-4-2019 - SHRI B. TIMOTHY, AND SHRI B.V. BORHADE, MEMBER PROCEEDINGS (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by Rotary Club of Mumbai Queens Necklace, the applicant, seeking an advance ruling in respect of 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 services? 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als to exchange ideas, build relationships, and take action. b) Rotary International supports Rotary clubs worldwide by coordinating global programs, campaigns, and initiatives, c) The Rotary Foundation uses generous donations to fund projects by Rotarians and other partners in communities around the world. As a nonprofit organization, all of the Foundation s funding comes from voluntary contributions made by Rotarians and friends who share our vision of a better world. Together, Rotary clubs, Rotary International, and The Rotary Foundation work to make lasting improvements in our communities and around the world. Rotary Club work with Rotary Foundation to : Promote Peace Fight Diseases Provide Clean Water, Sanitation and hygiene Save Mothers and children Support Education The purpose of Clubs is to promote integrity, and advance world understanding, goodwill, and peace through fellowship of leaders. The members come together to form a rotary club and it is not a service club. There is an annual budget of expenses and that money is pooled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted by it. The registration certificates under service tax and GST are enclosed at Annexure D and Annexure E respectively. The Club organizes events for the purpose of enabling members to meet and interact with each other. For such events the Club incurs various expenditure like banquet charges, catering services etc. Club also incurs expenditure like banquet and catering services for its weekly/monthly meting. The copy of such Banquet charges and Catering charges are enclosed at Annexure F Annexure G . 3.1 STATEMENT CONTAINING THE APPLICANT S INTERPRETATION OF LAW AND/OR FACTS, AS THE CASE MAY BE, IN RESPECT OF THE QUESTION(S) ON WHICH THE ADVANCE RULING IS SOUGHT SUBMISSIONS OF THE APPLICANT The applicant submits the following in their support: As per the definition of the term Person under section 2(84) of the CGST Act, 2017, there is no deeming fiction to treat the Club and its members as different persons. Therefore, the vital condition for a transaction to be taxable under GST, that a supplier and recipient should be different persons is not satisfied. The Club is an autonomous uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities to be treated as supply of goods or supply of services as referred to in Schedule II. 3) Therefore, in order to tax the transaction between an association or club or Club and its members, said transaction must either fit clause (a) or(c) above. 4) Explanation for transaction to be outside the purview of Clause (a) of section 7(1): Clause (a) of section 7(1) covers all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Therefore, in order to tax the transaction, the supply must be for a consideration and it should be in the course of furtherance of business. Business : Clause (e) of section 2(17) specifies the term Business to include: provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members Therefore in order to satisfy the term business, there must be some benefit/facility to its members. In our case, there is no facility or ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as supply of services. The above entry in Schedule II is analogous to and draws strength from the provision in Article 366(29A) (e) of the Constitution according to which a tax on the sale or purchase of goods includes a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. Above circular has not considered the definition of supplier as well as recipient before taxing a transaction u/s 7(1)(a). There must be two different persons to tax a transaction under said provision. Merely because an association of person has been included as person u/s 2(84) does not imply that members of such association are different persons. Circular has invoked the concept of deemed sale as provided under Article 366(29A) of the Constitution. It must be noted that clause (e) of said Article only enables to tax supply of goods by an association to its members as deemed sale. It does not enable to tax supply of service as a deemed service. Even para 7 of Schedule Il only covers supply of goods by any unincorporated association. It does not cover supply of services. Unless pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overed in the scope of supply u/s. 7 of the CGST Act, 2017. Hence, the same shall not be taxable. The club also relies on Advance Ruling of Lions Club of Poona Kothrud = 2018 (12) TMI 590 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA where Maharashtra Authority of Advance Ruling have rules that Club is not formed to provide any supply of goods or services to its members qua the fees received from them. There being no supply qua the fees received, there arises no occasion to visit the definition of Supply under the GST Act - Applicant club, as per the facts put up, does not render any Supply for the purposes of the GST Act. Hence registration under GST is not required The copy of said Advance ruling is enclosed at Annexure H Since the transaction between the club and its members does not tantamount to supply u/s 7 of the CGST Act, 2017, no GST is applicable on membership fees collected by the club from its members. PRAYER In light of the above, a Ruling is sought from the Hon ble Authority on whether subscription fees and admission fees received from members are liable to GST and if yes, whether Input tax credit on the banque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Each of the speakers encourage the members to contribute to do on the field of social service and at the same time share their learnings in life which in turn helps the members perform as effective social worker. The members contribute to the expenses for holding such meeting. No amount of money raised for spending on the beneficiaries or medical projects are utilized for the meeting. On the contrary, the members not only pay for holding the meetings but also donate money for the various social causes. We reiterate that the club is not formed to build and impart skills in leadership for individual benefits. The above stand has also been affirmed by the Advance Ruling authorities in the case of Lions Club of Kothrud, Pune = 2018 (12) TMI 590 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. 4. Clarifications on the observations of the submissions made by the jurisdictional officer in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard 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 as part of their gesture towards the self less and hard work Rotarians carry out that they may provide additional discounts to the Rotarians or any one who approaches through Rotarians. c) It also facilitates gathering of professional and experts locally and globally to enhance their contacts for furtherance of their business. This activity cannot be categorized as community service rather it indicates towards furtherance of one s own cause . We reiterate the submissions made in Point 3 4(a) stating the purpose of said meetings. As mentioned the purpose of said meetings is for members to become leaders to perform towards the causes of the clubs and not personal gains. d) It also appears that Rotary club charges fees to admit a person as their member which is not used for any social cause. The same can be seen from the Balance sheet sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord 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 Central Commissionerate. Further as mentioned in your letter to examine the the application filed by M/S. Rotary Club Of Mumbai Queens Necklace the undersigned is having the opinion that,- 1.1 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. 1.2 According to Section 17 (5)(b) of CGST 2017 mentions various situations wherein cenvat credit cannot be availed, we would like to draw special attention to section 17 (b): (b) The following supply of goods or services or both i) food beverages, outdoor catering, beauty treatment. Health services, cosm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lub 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 Rotary? What Our Members Receive Brad Howard, RID 2015-17 from which it can be understood that members are benefitted by these meetings with eminent personalities and their guidance while at the same time such privileges are not available to a not member. It is also said that Rotary Club Membership allows members to sit next to people with whom he/she may have to pay $250 an hour to meet This clearly shows that there is furtherance of business involved. 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 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essels 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 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. Additional submissions on 01.04.2019 In the instant case M/s. Rotary Club of Mumbai Queens Necklace have raised two queries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, 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 special attention to section 17(5)(b) (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:- [(2) (a) motor vehicles for transportation of person having approved Seating capacity of not more than thirteen persons (incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 services? 1.2 If the above receipts are liable to GST can the Club ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers . (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are squarely applicable to the instant case. In view of the above and 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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