GST payable on membership/ subscription fee received from members of a club

In re Poona Club Limited (GST AAR Maharashtra)

GST payable on membership/ subscription fee received from members of a club

The AAR, Maharashtra in the matter of M/S the Poona Club Limited [Advance Ruling No.GST-ARA-123/2019-20/B-12 dated January 31, 2022] held that, club of membership association and its members are distinct persons and the membership/ subscription fee, and annual fee, received from its members are consideration for supply of goods/services as a separate entity covered by the scope of the term ‘business’ and, thus, principle of mutuality is not applicable. Hence, GST would be payable on amounts received from club members.

Facts:

M/s. the Poona Club Limited (“the Applicant”) is a membership association formed for creation of common infrastructure for members, maintain the same and administer the club, for which the Applicant receives the capital funds, raised exclusively through membership fee from its members. Certain members are required to pay annual subscription that is spent mainly for office & administrative expenses such as salaries, security, labour charges, electricity etc. and not for providing any specific service or goods to members. Moreover, all members have to pay Annual Game Fees also.

The Applicant contended that, the membership fee, annual subscription and annual games fee collected from members of club are not liable to tax under the Central Goods and Services Tax Act, 2017 (“the CGST Act”) as the club and the members are considered as same identity and hence the principle of mutuality is applicable and there cannot be any business or supply by one person with its own self. Further contended that, under Section 2(31) of the CGST Act i.e. the definition of consideration, there should be a recipient who receives the goods and services and the ordinary meaning of ‘business’ requires profit motive to be established.

Issue:

Whether the membership fee, annual subscription fee, annual games fee collected by the Applicant from its members are liable to tax under CGST Act?

Held:

The AAR, Maharashtra in Advance Ruling No.GST-ARA-123/2019-20/B-12 dated January 31, 2022 held as under: