No Service tax leviable under ‘Club or Association’ service in respect of the services provided by clubs to their members in view of the principle of mutuality
In the instant case, the three Appellants namely Matunga Gymkhana, Tahnee Heights Co-Op Housing Society Ltd. and Mittal Tower Premises Co-Operative Society (the Appellants) were running a club for their members. The activities carried out by the Appellants for their members included Sports, Yoga etc.
The Department confirmed the demand of Service tax on the Appellants based on the premise that the Appellants had provided taxable service namely ‘Club or Association’ service specified in erstwhile Section 65(105)(zzze) of the Finance Act, 1994 (“the Finance Act”) read with Section 65(25a) thereof. Being aggrieved, the Appellants preferred their respective appeals before the Hon’ble CESTAT, Mumbai.
The Hon’ble CESTAT, Mumbai held as under:
Association’ service nor the consideration whether by way of subscription/ fee or otherwise received therefore be exigible to Service tax.
Therefore, the Hon’ble Tribunal after holding that the matter is no longer res-integra, decided the matter in favour of the Appellants.
Our Comments: The concept of principle of mutuality in respect of clubs and their membersneeds to be tested legally post facto July 1, 2012 (Negative List Regime of Service tax) whereby the definition of ‘Service’ provided first time under Section 65B(44) of the Finance Act, which interalia, provides that any activity carried out by a person for another for consideration is a ‘Service’.
However, Explanation 3 to Section 65B(44) of the Finance Act has carved out an exceptions to the General Rule that Service tax leviable only when services provided by a person to another.In terms of Explanation 3(a) thereof, an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons.
Thus effective from July 1, 2012, services provided by clubs even to their members may be exigible to Service tax.