Case Law Details
In re The Banking Codes And Standards Board Of India (GST AAR Maharashtra)
Whether GST is liable to be paid on the contribution made by Members towards ‘Annual Membership Fees and registration fees’ to the Corups Fund of Banking Codes And Standards Board Of India (BCSBI) and recurring expenditure being incurred?
We find that the applicant body was formed in the year 2006 and then went on to enlist Banks as members. This argument put forth by the applicant does not hold good for the present facts. In the subject issue the member banks have not come together to form the applicant body. The applicant body had been formed by the RBI to prepare codes of commitment to customers of various banks and this activity is done by the applicant very selectively i.e. only to Banks who pay them some fees. The applicant is not performing any sovereign function. The essence of the principle of mutuality is present only in situations where a group of persons form an association and contribute to constitute income of the associations in the nomenclature of a common fund, which so collected is used for the benefit of the members. Here the member banks have not come together contributing their resources to form the board like that of the applicant and for the benefits of the members themselves. In the present situation there is no compulsion under any enactment for the member banks to become the member of the applicant since the membership of the applicant body is voluntary. Hence the principle of mutuality is not at all applicable in present case. It is also mentioned that Banks have been constituted as per The Banking Regulation Act, 1989 and are a separate legal entity from the applicant body. The Principal of mutuality says that a person cannot make profit from himself. It can be clearly seen that Banks in India have been in existence a lot prior to the year 2006, when the applicant body was formed for the purpose of creating awareness and ensuring the correct following of the Codes and Standards for Services by the Banks in India, but here the applicant is only creating awareness about their member banks and that too after collecting Annual Membership and Registration fees from the Banks.
With respect to the applicant’s contention that “as regards the Principle of Mutuality in Service Tax matters, which is now replaced by GST, the issue is now pending before the Honorable Supreme Court of India (Constitution Bench). As such, till such time as the issue is settled by the Apex Court, the Principle of Mutuality should be extended to the levy of GST and no GST is leviable on the their activity even under the CGST Act, 2017 and the Rules made thereunder”. We find that the applicant has proceeded on the assumption that there exists a principle of mutuality in their case. However, for reasons mentioned above we find that since the said principle does not exist in the case of the applicant, their request for extension of the principle to the levy of GST is not sustainable.
In view of the foregoing we find that the applicant is supplying services to their Member Banks, against a consideration received from them in the form of Annual membership fees and registration fees and their supply is in furtherance of business as defined under Section 2 (17) (e) of the Act. (“provision by a club, association, society, or any such body (jor a subscription or any other consideration) of the facilities or benefits to its members”).
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