No GST to be levied on payment of the Membership/Admission Fee for entry in the Club

The recent ruling in the Maharashtra AAAR has successfully set aside the earlier provisions of the state AAR ruling that had termed membership fee as a supply of service liable to GST. The state appellate body had issued a similar order in case of the Lions Club membership fee and has therefore passed a precedent for other cases too.

Accordingly,  such fee charged by the clubs for entry/ admission as a member cannot be designated as a” supply of services” for meeting the administrative expenses and therefore is not liable for GST, the Maharashtra Authority of Advance Ruling (AAAR).

The fact that the membership fee of the appellant entity namely “the Rotary Club of Mumbai Queens Necklace” was chargeable for meeting administrative expenditure and not for any providing any specific facility or benefits being offered, it doesn’t come under the taxable limits and thus, no ITC could be effected” served as the foundation for the ruling of the case.

Therefore, the ruling Maharashtra AAAR states “The amount collected as membership a subscription and admission fee from members is not liable to GST as a supply of services”.

What was the situation before?

The Maharashtra AAAR authority ruled out a completely contrasting decision in the earlier case.

In re.M/s Rotary Club of Mumbai Queens Necklace case (“the applicant” or “Club”), the above-mentioned club was an unincorporated association of individuals with an object to promote integrity, advance world understanding, and goodwill & peace through fellowship of leaders formed as not for profit association. Accordingly, it neither rendered any special commercial service to its members, nor it offered services to outsiders in turn of any charges.

It only collected membership fees including the fee charged on admission from the members.

Following were the issue mainly in question before the authority-

a. Whether such sum levied and collected as membership or admission fee for members shall be chargeable under GST as a supply of services?

b. If the above receipts are to be considered as “SOS” and chargeable to GST, will they be able to claim the Input Tax Credit (“ITC”) for the taxes paid on expenses like of the tax paid on the amount given to the catering services while holding club members meeting?

In this case, the Maharashtra ruling authorities vide Order No. GST-ARA-118/2018-19/B-46 on April 30, 2019, held that the amount so collected namely as subscription &admission fees from the members by Rotary Club shall be liable to GST as the supply of services holding the fact that the association is a deemed distinct person different from its members,

Also, it was held that the applicant will not be eligible to claim ITC to the taxes paid on such catering or banquet or similar services availed on behalf of the club meetings and such other events or activities.

Conclusion:

However, the order passed by the Maharashtra AAAR has effectively overturned such earlier ruling that had termed membership fee as “Supply of Services” liable to GST. A parallel order was granted by the state appellate body had issued in re. Lions Club membership case and thus the reasoning for the basis of the ruling was kept the same. Therefore, the ruling has paved the way for possibilities in activities of entities other than charitable objectives to look for a solution in cases of confusion in the provisions of GST. 

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