Clubs and associations will have to levy Goods and Services Tax (GST) on fees collected from members retrospectively from July 1, 2017. The CBIC vide Notification No. 39/2021–Central Tax dated December 21, 2021 notified the amendments of the Finance Act, 2021 w.e.f. January 01, 2022 to be effective from July 01, 2017 retrospectively.
Section 2(17) of the CGST Act, 2017
“business” includes-
(e) 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;
Section 7. Scope of Supply
(aa) the activities or transactions, by a person, other than an individual, to its 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 its 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;]
39th GST Council Meeting Agenda
The activity referred to in Schedule II, para 7 is identical to the provisions in Article 366(29A)(e) inserted by 46th Amendment to the Constitution. Since the Hon’ble Supreme Court has ruled in Calcutta Club case that 46th Amendment does not take away the doctrine of mutuality, it is doubtful that the said provision in Schedule II para 7 read with sub clause of Section 7(1) prior to its deletion, would withstand challenge to levy of supply of service by an unincorporated club or association to its members.
The supply of goods or services by an incorporated or unincorporated club or association, has in view of the Supreme Court judgment in Calcutta Club case, completely gone out of tax net after deletion of clause of sub section 1 of section 7 of CGST Act, 2017.
Therefore, GST on supplies of goods or services by an unincorporated or incorporated entity to its members may become subject matter of litigation There is no provision in the CGST Act, 2017 which stipulates that an unincorporated or incorporated entity and its members shall be distinct persons In the absence of a provision to this effect, the subject judgment of the Hon’ble Supreme Court becomes squarely applicable The doctrine of mutuality applies and thus supplies by unincorporated or incorporated entity to its members is a supply to self and not leviable to GST.
Therefore it is imperative to amend the CGST Act, 2017 so as to safeguard the levy of GST on supplies by an association or body of persons (whether incorporated or not) to its members It is proposed that amendment to the CGST Act, 2017 as being proposed below may be carried out to prevent litigation on this count.
Under GST regime the Appellants in various Advance Rulings had contended that services by clubs, associations etc to its members are not taxable for the reason of principle of mutuality determined by the Hon’ble Apex Court in the case of Calcutta Club Limited.
Now, through this amendment, all such contentions has been set aside.
Transactions between Club/AOP/Any other unincorporated association and its members for consideration to be treated as supply, and hence liable to GST.
Here the Latest Case Laws/rulings on the Subject:
| -Maharashtra AAR dt. 31-01-2022 |
| Membership fee collected from members at the time of giving membership is liable to tax under GST Act. And the annual subscription and annual games fee collected from members of Club is also liable to tax GST. |
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| -Tamil Nadu AAR dt. 31-01-2022 |
| The membership fee collected by the applicant is taxable under Section 7 (1) (aa) of the CGST Act.
The applicant has stated that “Rotary” is an international organization having Clubs in 216 countries engaged in humanitarian and charitable services. These services are executed through various districts comprising of many Clubs. The amount collected by rotary is pooled together only for sole purpose of charity and humanitarian activities and these amounts are also used for administration and meetings. In some cases the amount so collected is likely to exceed Rs. 20 lacs, being the threshold for registration under CGST Act, 2017. The applicant is liable to be registered under the GST Act, as they are providing taxable supplies. |
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| -Maharashtra AAR dt. 09-12-2021 |
| The activity of the applicant i.e. collecting contributions and pending towards meeting and administrative expenditures only, is ‘business’ as envisaged u/s 2(17) of the CGST Act, 2017. in the instant case there is a supply by the applicant to its members and consideration is received in the form of “fees”. |
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| -Maharashtra AAR dt. 22-11-2021 |
| Rotary Clubs and Rotary Districts consists of an association of persons, who undertake certain social activities. The applicant collects fees from its members which are used for its own administration purposes as well as for facilitation of meetings of its members. The applicant is one of the many Clubs in a Rotary and forms a District of Rotary along with other Clubs. The applicant also makes payment to the District of Rotary (DOR) which is used to run the administration of the DOR.
The fees collected from members are pooled together to be spent for meeting/administration expenses & for making payments to the DOR/International Office, for administrative expenses. The applicant has submitted that, it is a group of persons from different fields and industry working towards the betterment of the society by carrying out various charitable causes and activities through a Charitable Trust. The applicant also receives amounts as donations/charity which are used exclusively for the purposes of the said donation/charity and no amount is utilized for administration purposes. Thus, charitable activities are carried out from the amounts received as donation/ charity whereas meetings/ administration expenses are incurred from the fees received from its members. Activity of the applicant i.e. collecting contributions and spending towards meeting and administrative expenditures only, is considered as `business` envisaged u/s 2(17) of the CGST Act, 2017. |
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| -Maharashtra AAR dt. 22-11-2021 |
| The applicant Club and its members are distinct persons and the amounts/consideration received by the applicant from its members are nothing but consideration received for supply of goods/services as a separate entity. The applicant has to pay GST on the said amounts received against membership subscription and admission fees from members. |
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| -Rajasthan AAR dt. 27-09-2021 |
| The services provided by the Club to its members is taxable as per clause (aa) of sub-section (1) of section 7 of the CGST Act, 2017 w.e.f. July 1, 2017. |
The Application is disposed of, as being withdrawn voluntarily and unconditionally. (Advance Ruling)
Rotary Club of Nagpur – 31/01/2022
Rotary Club of Bombay Sea Face – 02/11/2021
Rotary Club of Bombay Peninsula – 11/10/2021
Rotary Club of Bombay Pier – 04/08/2021
Rotary Club of Bombay Bayview – 22/06/2021
Rotary Club of Bombay Central – 22/06/2021
Rotary Club of Bombay Central – 22/06/2021
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