In re Navi Mumbai Sports Association (GST AAR Maharashtra)
From the submissions made by the applicant, we find that they are registered under Section 12AA of the Income Tax Act and are providing training and coaching in Football, Basketball, Athletic, Cricket, swimming, Karate, Dance, Physical fitness and ‘summer coaching’.
We also observe that Football, Basketball, Athletic, Cricket, swimming, and Karate are sports and ‘Dance’ would be covered under Arts. However, Physical fitness can neither be considered as sports nor Arts or culture. Further, the term ‘summer coaching’ is a general term which cannot be said to cover sports, Arts or culture.
In view. of the above we find that training and coaching in Football, Basketball, Athletic, Cricket, swimming, Karate, Dance by the applicant would be covered under Entry No. 80 of notification 12/2017-CTR dated 28th June, 2017. as amended and ‘Physical fitness’ training and ‘summer coaching’ are not covered under the said Entry No. 80 mentioned above. Therefore, the benefit as per Entry No. 80 of notification 12/2017-CTR dated 28th June, 2017. as amended will be available to the applicant only in respect of training and coaching in respect of Football, Basketball, Athletic, Cricket, swimming, Karate and Dance.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING,MAHARASHTRA
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively] by M/s Navi Mumbai Sports Association, the applicant, seeking an advance ruling in respect of the following questions.-
1. Whether the following amount collected by the applicant from its members is liable to GST?-
a. Entrance/Admission fees which forms part of corpus fund
b. Annual Subscription fees
c. Annual Maintenance fees
2. Whether the amount / fees collected towards rendering training / coaching in recreational & sports activities are exempt from payment of GST under entry no. 80 of notification 12/2017 CTR dated 28th June, 2017?-
a. Football / Basketball/ Athletic/Cricket/Swimming coaching fees
b. Summer coaching fees
c. Dance coaching
d. Karate / Physical fitness
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression ‘GST Act’ would mean CGST Act and MGST Act.
2. FACTS AND CONTENTION – AS PER THE APPLICANT FACTS:
2.1 M/s Navi Mumbai Sports Association (“the Applicants/Association”) is a Non-Government Sports Organization & Public Charitable Trust registered under The Societies Registration Act, 1860 VIDE Registration 03.02.1981 & The Bombay Public Trust Act, 1950 vide registration dated 07.04.1981. The Association holds a valid registration under section 12AA of the Income Tax Act, 1961.
2.2 The association has constructed international sports complex on land allotted by M/s CIDCO to it. The main aim & object of the Association is to encourage & foster sports, cultural & social activities. It also provides health and sports education, and inter alia includes the following:-
a. providing facilities for indoor and outdoor games, swimming pool, recreation activities.
b. providing facilities for physical activities.
c. Organize cultural programmes.
d. Organize training camps for youngsters with a view to serve the national interest and also provide necessary facilities for the same.
e. Utilize the funds to the maximum for developing the sports and other similar activities on no loss no Profit basis.
f. Promote all other activities as are necessary from time to time to further the aim and objects of the association.
g. Utilize the income and properties of the Association, whatsoever derived from solely towards the object and business of the Association and no portion thereof shall be paid, transferred or distributed directly or indirectly by way of dividend, bonus or interest or otherwise whatsoever, by way of profit to the members of the Association.
2.3 The applicant association is regulated and managed by an elected body i.e. Managing committee, which looks into the affairs of the association & makes policy decisions which aims at promotion of sports, fellowship and fitness for individual, families, schools, institutions and corporate bodies. For promotion of sports, Annual Camps are held to select talents and rigorous work out are given to make them champions. Schools and colleges are provided the association’s infrastructure for sports and competitions. For fellowship, it has affiliations with prestigious clubs across India and abroad for the benefit of its members.
2.4 The sports complex is equipped with various facilities for achieving its objectives, which includes indoor badminton, squash, table tennis courts, gym and health club, retiring rooms, football and cricket ground, swimming pools, restaurants, conference halls etc.
2.5 Any person desirous of joining the association can do so by becoming member & shall subscribe to the objects of the Association, shall adhere to the rules & regulations & bye laws of the Association. There are various categories of Membership such as Founder member, Life member, Patron member, Organization member, General member, Student member, Associate member etc. The members on joining are required to pay one time admission / entrance fees based on the type of membership & the same shall form part of corpus of the applicant trust / association.
2.6 Apart from entrance/ admission fees, the association also collects various fees such as : Annual subscription & Annual maintenance fees ; Sports Activity Fees ; Training / coaching fees ; Hire charges for Banquet Hall/ Open ground/ Conference Room & Royalty from caterers/decorators.
2.7 The amounts collected by way of various fees stated here in above are pooled together for Convenience and it is not expected to generate any surplus from it. Association, being a charitable entity, aims only at furtherance of its object. It also receives donation from patrons for its charitable activities and to foster its objects.
2.8 . The applicant is currently charging and collecting GST on the all receipts/ fees except on fees received for training and coaching services provided in various sports in view of exemption under Entry 80 of notification 12/2017-CTR dated 28th June, 2017.
2.9 Based on various court pronouncements & rulings, few members are of the view that GST is not leviable on the annual subscription & maintenance fees collected from members and therefore the subject application has been filed.
B. STATEMENT CONTAINING APPLICANT’S INTERPRETATION OF LAW
2.10 Collection of fees from members is outside purview of GST on the principle of MUTUALITY.
2.10.1 Harmonious reading of Sections 2(17), 2 (31), 2(105), 2(93) and Section 7 of the CGST Act, 2017 determines that where a consideration is involved in a transaction, the recipient is the “person” who pays the consideration to the supplier. Hence, 2 different persons have been envisaged in the law to tax a transaction of supply of goods or services or both in course of business or furtherance of business made for a consideration.
2.10.2 The term “person” is defined u/s 2(84) of the Act and Section 25 of the Act provides that establishments of a person in different states/union territories required to obtain registrations, shall be treated as distinct person. However, the said section 25 does not provide that association and it’s members are to be treated as distinct persons for the purpose of GST. Therefore, the association and it’s members, on the principle of mutuality they are one and same person.
2.10.3 Further, clause (e) in the definition of term “business” of 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; has to be interpreted & made applicable in case of proprietary clubs, wherein proprietor owns the property and funds and conducts the activities of club to attempt to make a profit. A member’s club functions on mutuality, which is not the case in case of “proprietary / owner’s club.
2.10.4 Hence from above provisions of the Act, the impugned transaction between the association and its member do not get cover under section 7(l)(a) of the Act, as there are no two distinct person’s involved.
Analysis for clause 7(1) (c) of the Act
2.10.5 Schedule I enlists for deeming provision of the activities without consideration therein to be treated as “supply”. Entry 2 of said schedule I provides for Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business. Section 25 does not specifically provide that club/association and it’s members are to be treated as 2 separate distinct persons. Based on principle of mutuality, an association and its members are the same person and hence the transaction between club/association and it’s member does not get cover under entry 2 of schedule I to be treated as “supply”, as well.
2.10.6 The Principle of Mutuality applies to all taxes i.e. Income Tax, VAT/ Sales Tax and Service Tax, alike and the courts of law have expounded and illustrated this principle in details, and the case laws are mentioned and relied upon as under:-
> Decision of Hon’ble Jharkhand High court in case of Ranchi Club Ltd. v. Chief Commr (2012)6TMI 636.
> Decision of the Hon’ble Mumbai CESTAT In case of Cricket Club of India Ltd. v. Commissioner of service Tax (2015) 9 TMI 1389 and
> Decision of the Hon’ble Gujarat High Court in the case of Sports Club of Gujarat Ltd v. UOI (2013) 7 TMI 510.
2.10.7 The larger bench of Hon’ble Supreme court in case of STATE OF WEST BENGAL & ORS Vs. M/S CALCUTTA CLUB LTD / RANCHI CLUB LTD (2019) TIOL 449 observed at length the applicability of principle of mutuality & held that services by a members’ club to its members amounts to -services to self and would not qualify as a service that attracts tax. In view of the fact that the concept of mutuality is being upheld by the Larger Bench of Hon’ble Supreme Court during the service tax regime (both pre & post negative regime), the same principle will also be applicable in the GST regime, as there is no change in the legal position.
2.10.8 There is nothing contrary to the said decision of Hon’ble Apex Court in the case of M/s Calcutta Club Ltd and as per Article 141 of the Constitution of India, the law declared by the Supreme Court shall be binding on all Courts within the territory of India and therefore, the authoritative pronouncement should bind all. There are no differences in the relevant definitions in Service Tax era and GST era. In fact, under service tax there was a deeming clause i.e. “An unincorporated association or a body of person, as the case may be, and a member thereof shall be treated as distinct person”. The said clause is absent under GST. The intent in GST was never to treat club and members are separate persons.
2.10.9 Hence, it can be concluded that based on the principle of mutuality the receipts collected from members is outside the purview of GST. Further, if it is felt that, the impugned transaction is leviable to GST, applicant requests to distinguish the applicability of above ratio of Hon’ble Supreme court relied upon.
2.11 COLLECTION OF ANNUAL SUBSCRIPTION & MAINTENANCE CHARGES IS ONLY TO DEFRA Y THE ADMINISTRATIVE AND OPERATIONAL EXPENSES
2.11.1 The requirement of working capital funds is met by way of collection of annual subscription and maintenance charges from the members. The amount collected by association is for convenience of members therein and pooled together only for paying administrative expenses and communication expenses, there is no element of business in this activity and neither any services are rendered nor are any goods being traded against the amount collected as membership subscription and admission fees from members. The Hon’ble Maharashtra Advance Appellate Authority in following cases has held that collection of annual subscription and annual maintenance charges is not leviable to GST as it is merely for defraying the administrative, operational and management expenses of the club:-
