ARA, Rajasthan has pronounced judgment on 27.9.2021, in the case of Umed Club (2021) 36 J.K.Jain’s GST & VR 344, that;
‘In view of the retrospective amendment made in the definition of ‘Supply’, per S.7(1)(aa) & deletion of Item 7-Sch.II, the Services provided by the Club to its members, are taxable, w.e.f. 1.7.2017.’
1. Background.─ The applicant vide application form ARA-01, sought Advance Ruling to confirm the applicability of Service Tax on Services provided by club to its members. In this regards, it is clear that this forum i.e., Authority for advance ruling (AAR) is meant for GST only. To decide a question pertaining to old era i.e., Service Tax is not in the scope of this Authority. However, on gone through the contention of the applicant in the instant case, the purport of the applicant is to seek advance Ruling to confirm the applicability of GST on Services Provided by club to its members. Hence, we will discuss the case in light of GST only.
The Applicant has sought Advance Ruling to confirm the applicability of GST on Services provided by club to its members. The applicant has taken the aid of Judgment delivered by the Hon’ble Apex Court in the case of State of West Bengal v. Calcutta Club Limited in Civil Appeal No.4184 of 2009. The applicant has relied on the above said judgment and has contended that as service tax was not leviable on the services provided by a club to its member under erstwhile Service Tax regime, so the same will also apply in GST Regime. The applicant has also taken shelter of S.7(1)(A) and Schedule II of CGST/RGST Act to discriminate between Goods and Services and contented that as per schedule II the Supply of Goods by the Club to its member is only a taxable event under GST Act.
2. Findings by ARA.─The ARA analysed the following definitions of CGST Act, 2017;
S.2(102). “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
S.7. Scope of supply─(1) For the purposes of this Act, the expression-supply includes─
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business,
(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”
(b) import of services for a consideration whether or not in the course or furtherance of business; and
(c) the activities specified in Schedule I, made or agreed to be made without a consideration;
(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Sch.II
(2) Notwithstanding anything contained in sub-section (1),─
(a) activities or transactions specified in Schedule Il; or
(b) such activities or transactions undertaken by the Central Govt., a State Govt. or any local authority in which they are engaged as public authorities, as may be notified by the Govt. [.2.], shall be treated neither as a supply of goods nor a supply of services.
(3) Subject to the provisions of sub-sections (1), (1A) and (2), the Govt. may, [.2.], specify, by notification, the transactions that are to be treated as─
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods
Para 7 of Schedule II of the CGST Act has been omitted by the Finance Act, 2021, w.e.f. 1.7.2021(sic. 1.7.2017).
Prior to its omission paragraph read as under:
“Supply of Goods: The following shall be treated as supply of goods, namely:–Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.”
3. Analysis by ARA.─ 5. In view of the above legal provision, GST laws expanded the scope of ‘supply’ to tax supplies between the club/association and its members, to overcome the principle of mutuality.
A retrospective amendment (w.e.f. 1.7.2017) has been made vide Finance Act, 2021 by inserting a new clause ‘(aa)’ after clause (a), in S.7(1), CGST Act to widen the scope of term ‘supply’ by including therein activities or transactions of supply of goods or services or both between any person (other than individual) to its members or constituents or vice versa for cash, deferred payment or other valuable consideration. Consequently, Para 7 of Schedule II of the CGST Act has been deleted retrospectively (w.e.f. 1.7.2017) which was related to ‘supply of goods by unincorporated associations or body of persons to a member thereof for cash, deferred payment or other valuable consideration’ being activity/transaction treated as supply of goods.
Further, an explanation is added to say that the person and its members or constituents shall be deemed to be two separate persons and overriding effect has been given to the said explanation over anything contained in any other law for the time being in force and even to the judgments of any Court, Tribunal or any other authority. Thus, the decision given by the Hon’ble Supreme Court in State of West Bengal v. Calcutta Chub Limited for erstwhile Service Tax regime, is no more applicable on account of specific overriding effect over judgments.
4. Conclusion by ARA.─ Thus, the Services provided by the Club to its members is taxable as per clause (aa) of S.7(1), CGST Act, 2017 w.e.f. 1.7.2017.
5. Ruling.─In view of the foregoing, the ARA ruled as under:–
Question:─Whether GST is payable on the services provided by clubs to its members?
Answer:–Yes, GST is payable on the services provided by clubs to its members.