Case Law Details
In re Ranchi Club Limited (GST AAR Jharkhand)
Once it has been established that the applicant is not doing any business in terms of section 2(17) of the CGST Act, 2017, it can be deduced that activities carried out by the applicant would not come under the scope of supply as envisaged under section 7(1) of the CGST Act, 2017.
With regard to the contention that the applicant is governed by the principal of mutuality, the applicant submitted that the Club was established for non – profit motive and the club was and its members were distinguishable, and they do not have any right in any surplus, if any generated, by the applicant club and none of the activities of the club could be tainted with commerciality. Any reserves held by the club are also used for the purpose of furtherance of the activities of the club and cannot be used by any member for his/her own benefit.
In this regard, we find that the applicant is giving service to its members but the club is formed on the principle of mutuality and, therefore, any transaction by the club to its member is not a transaction between two parties. However, when the club is dealing with its members, it is not a separate and distinct individual. Further, we find that it is a mutuality which constitutes the club and, therefore, supply by a club to its member and its services rendered to the members, is not a supply or service by club to the members.
AAR held that
I. The service provided by the applicant to its members do not come within the definition of ‘Supply’ as envisaged under the Central/ Jharkhand Goods and Services Tax Act, 2017;
II. Yes, the applicant is governed by the principal of mutuality.
III. Yes, the applicant and its members are one and same.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, JHARKHAND
Note: Under Section 100 of the JGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of JGST Act 2017, within a period of 30 days from the date of service of this order.
Order under Section 98 of CGST Act, 2017 and under Section 98 of SGST Act, 2017
M/s Ranchi Club Limited, Main Road, PO- Ranchi GPO, PS- Kotwali Thana, Ranchi – 834001 (hereinafter referred to as “applicant”), having GSTIN ((20AAACR7751E1ZR)), have filed an application for advance Ruling under Section 97 of the CGST Act, 2017 and under Section 97 of Jharkhand GST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Rules 104 of Jharkhand GST Rules, 2017 in Form GST ARA-01 discharging the applicable fee under the CGST Act and Jharkhand GST Act.
2. The applicant is involved in providing/rendering services and made the following submission:-
(i) M/s Ranchi Club Limited (hereinafter referred to as ‘assessee/club’) is a Not-for- Profit corporate entity registered under the Companies Act, 1956 (now the Companies Act, 2013). The assessee is a limited company which is guaranteed by its members. The assessee is not a company which provides shareholding to its members rather its liabilities/debts are guaranteed by the members.
(ii) As per the memorandum and articles of association there are various categories of persons who may be allowed to use the club. These persons may be defined in the category of permanent members, resident members, corporate members, honorary members, courtesy members and associate members.
(iii) That however it is only the permanent members are deemed to be ‘members’ of the club thereby meaning that the permanent members are those who have a right to elect the executive committee of the club. They are also those who provide their personal guarantee with regards to the debts and liabilities of the club. It is imperative to mention that they are not part of any income which the club generates.
(iv) That the services provided to the club can be exclusively by the said categories of the members of the club and is not open for outside usage.
(v) That the club and the members of the club are not distinct entity and cannot be treated as two different persons. Hence the provisions of GST are not applicable to the ‘Permanent Members’ of the club as there is no flow of services from one person to another.
(vi) The permanent members of the club are mutual to the club and cannot be treat as two separate entity.
(vii) That the principle of mutuality is an important principle governing both the realm of indirect and direct taxation. The Goods and Service tax also incorporates the principle of Mutuality.
(viii) That the same exemptions were granted to the assesee for Income Tax Act, Jharkhand VAT and Service Tax laws in the previous regime.
3. The applicant sought Advance Ruling on the following questions/issues:-
(i) Whether the service provided by the assessee to its members come within the definition of ‘Supply’ as envisaged under the Central/ Jharkhand Goods and Services Tax Act, 2017?
(ii) Whether the assessee is governed by the principal of mutuality?
(iii) Whether the assessee and its members are one and same?
Please become a Premium member. If you are already a Premium member, login here to access the full content.
