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TMI Blog2022 (2) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... the present applicant. There is no list or limit or any restriction prescribed in this respect in this amendment. The fees, collected by the applicant, is nothing but the consideration for supply of services/goods and is covered by the scope of the term business . The club and the member are two distinct persons. The principle of mutuality has no application after this amendment. All the other case laws relied upon, also do not provide any guidance on the legal situation, particularly after the amendment - undertaking of a commercial activity, whether or not the same is for pecuniary benefit (used in clause (a) above), implies that whether or not such activity yields the benefit which can be quantifiable in monetary terms or not. Hence the intent behind the said clause (a) is to even cover the commercial transactions which are in the nature of barter or exchange wherein the benefit is in non-monetary terms. Thus, the interpretation of the applicant that 'pecuniary benefit' means 'profit' is not correct. Further, Sub-clause (e) is a specific clause made for associations, clubs and societies and the same does not talk about any profit motive to be attributed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Life Member but shall not include a Subsidiary Member. Subsidiary Member means and includes : (i) Corporates Member ; (ii) Gymkhana Subscriber (iii) Honorary Member ; (iv) Spouse Subscriber ; (v) Games playing subscriber ; (vi) Visiting subscriber ; (vii) N.R. I Subscriber ; (viii) Lady Subscriber 2.2 Club dues are defined in sub clause (d) as : Club Dues in relation to a Member, means include, aggregate amount outstanding against such Member on the date of billing on account of any one or more of the following: (i) Fees prescribed as periodical subscription. (ii) Fees prescribed for any game, sport or facility made available by the Club, including fees for guest, reservations for functions etc. (iii) Charges for food, provisions or Stores purchased from the Club or Contractor appointed by the Club. 2.3 All services or goods supplied/provided to all types of members are charged specifically at rates determined by club, as and when the members utilize any facility of the club. The capital funds are raised exclusively through membership fee at the time of giving membership. As per article 9C, 60% of the membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (e) does not. Therefore, the intention of the Legislature is clear that profit motive is not ousted from sub-clause (e) though it is ousted from sub-clause (a). 2.7 Assuming but not admitting that profit motive is not required in sub-clause (e), it is well settled that where the main objects of the entity is not of a commercial nature , then that activity cannot be called business , whether or not the Legislature makes profit motive irrelevant. The very term business requires commercial character. Sub-clause (e) ultimately occurs within the definition of business and therefore there must be some underlying commercial nature to the main objects of the club. As the main objects of club is promotion of sport activities, there is no commercial nature. Therefore, the club cannot be said to be covered by sub-clause (e). For the same reasons, the club also cannot be covered by sub-clause (a), assuming without admitting that sub-clause (a) applies in the present case. Sub-clause (a) also requires commercial nature, whether or not profit motive is proved. 2.8 Furthermore, the club and its members have the same identity. Therefore the principle of mutuality would lead to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee (contribution to corpus), is one-time payment and there is no nexus with any particular goods or services as required in the charging section. The funds raised do not entitle anyone to claim any facility or benefit from the club. There is no element of service which is given in reciprocation of the contribution. The entire membership fees are capitalized. It is similar to capital contribution by partners in case of Partnership firm or share capital in case of Companies or sinking funds and reserves created in a co-operative housing society and therefore appellant's view is that the initial contribution i.e. membership fee is not a supply of either goods or any service and not liable for levy of GST. In the case of Prestige South Ridge AAR Karnataka has held that corpus or sinking fund collected from members is not liable for levy of GST. Such initial contribution cannot qualify as a consideration as defined in the Act. 2.13 Further, whenever the members use any facilities of the club, they have to pay for it and GST is charged to members for such supply of services or goods. 2.14 The principle of mutuality is also applicable to Annual subscription and annual game ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the main object of the trust is not commercial in nature, then the fact that the incidental objects require sale and purchase of goods is irrelevant. Thus, if the main object is not commercial in nature, then the entire activity falls outside the definition of business . 2.19. It is submitted that, if the intention of the Legislature was to tax every supply, then there was no necessity to place the limitation of in the course or furtherance of business in the charging section. This shows that the definition of business in Section 2(17) is to be read in a restrictive sense and not in an expansive sense. 2.20 The association as a formal entity is merely an agent for carrying out the directions and will of the members as a whole. Giving money to an agent to be used in accordance with the directions of the principal, for the benefit of the principal, is not a supply , much less a supply for consideration . The Applicant Association does not receive any charges as consideration for its services of carrying out the will of the members and acting as an agent. The subscription received is entirely at the disposal of the members, who act through the general body. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the applicant, Shri. Ishaan Patkar, learned advocate, Shri. G. Y. Patwardhan, learned advocate and Smt. Swati Mokashi, employee were present. Jurisdictional officer was absent. 4.3 Heard the matter 05. DISCUSSIONS AND FINDINGS: 5.1 We have perused the documents on record and considered the oral and written submissions made by the applicant. 5.2 The applicant has submitted that, Membership associations like Poona Clubs are formed for creation of common infrastructure for members, maintain the same and administer the club. There are two distinct activities. One purpose is administration of the club and maintenance. Second purpose is to provide the facilities and services to members for which members are charged as and when members use the facilities and to the extent of use. In view of this submission we are of the opinion that the purpose of the applicant club is also the same as mentioned. 5.3 The questions raised by the applicant are whether membership fee collected from members at the time of giving membership is liable to tax under CGST/SGST Act; and whether the annual subscription and annual games fee collected from members of club are liable to tax under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been inserted with effect from the 1st day of July, 2017, namely: (aa) the activities or transactions, by a person, other than an individual, to their members or constituents or vice versa, for cash, deferred payment or other valuable consideration. Explanation.-For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and their members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another; . 5.4.5 The amendment mentioned above has received the assent of the President of India on the 28 th March, 2021 and in view of the same the issue of principles of mutuality in the case of clubs, like the applicant, has been settled. 5.4.6 As per clause (aa) of Section 7 (1) of the CGST Act, the activities or transactions, by a person, other than an individual, to their members or constituents or vice versa, for cash, deferred payment, or other valuable consideration. The said clause (aa) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant has reproduced the definition of the term business defined u/s 2(17) of CGST Act 2017 and has stated that even though clause (e) of the said Section 2 (17) mentions that the '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 as the case may be', is termed as business,, is clear that profit motive is not ousted from the said sub-clause (e). Further the applicant has also submitted that assuming but not admitting that profit motive is not required in sub-clause (e), it is well settled that where the main objects of the entity is not of a commercial nature , then that activity cannot be called business , whether or not the Legislature makes profit motive irrelevant. The very term business requires commercial character. Sub-clause (e) ultimately occurs within the definition of business and therefore there must be some underlying commercial nature to the main objects of the club. As the main objects of club is promotion of sport activities, there is no commercial nature. Therefore, the club cannot be said to be covered by sub-clause (e). 5.5.2 To discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t motive is ousted or not, does not arise in this case at all. 5.6 The applicant has substantially borrowed from the observation/decision of the Hon'ble Supreme Court, made in the case of Commissioner of Sales Tax v Sai Publication Fund [(2002) 4 SCC 57]. We find that the issue in the said case was related to the erstwhile Bombay Sales Tax Act, 1959 and is therefore not applicable under the GST Laws. 5.7 The applicant has also submitted that the amendment to Section 7 of the CGST Act, 2017, mentioned above, was brought about by Section 108 which was not yet notified as on the date of the final hearing. We find that, Notification No. 39/2021-Central Tax dated: 21st December, 2021 has been issued whereby the Central Government has appointed the 1st day of January, 2022, as the date on which the provisions of sections 108, 109 and 113 to 122 of the said Act shall come into force. Hence we find that the relevant amendment has been notified by the Central Government. 06. In view of the discussions made hereinabove, we pass an order as follows: ORDER (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services ..... X X X X Extracts X X X X X X X X Extracts X X X X
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