GST UPDATE ON LEVY OF GST ON CONTRIBUTIONS RECEIVED FROM MEMBERS OF SOCIETY 157/2020-21

Supply of goods and services by clubs, societies to its members has always been a matter of discussion as to the applicability of the principle of mutuality be it in the case of Income tax, sales tax or service tax. This dispute is even been carried forward to goods and service tax regime. In this update we shall be discussing the ruling pronounced by Maharashtra AAAR in the case of M/s Apsara Co-operative Housing Society Ltd. M/s Apsara Co-Operative Housing Society is a Co-operative Housing Society, registered under the Maharashtra State Co-operative Society Act 1960. The main object as per the bye-laws are to obtain the conveyance from the promoter, to manage, maintain and administer the property of the society, to raise funds for achieving the objective of the society, to undertake and provide for, on its own account or jointly with Co-operative etc. For the purpose of obtaining the above objectives of the society, they raise funds by collecting contributions from the members of the Society, which are also called “charges” in terms of the bye-laws. The charges include property taxes, water charges, common electricity charges, contribution to repair and maintenance fund, contribution to the sinking fund, services charges, car parking charges, interest on the default charges, non-occupancy, insurance charges, etc. The AAR has passed the decision against the applicant wherein it was held that activities carried out by the Appellant would amount to supply in terms of Section 7(1)(a) of the CGST Act,2017 and accordingly would attract GST, as provided under Section 9 of the CGST Act,2017.
The following questions were put before the Maharashtra AAR
i) Whether the activities carried out by appellant would amount to supply and whether the same are liable to GST?
ii) Whether they are correctly discharging the GST liability, for which they provided the illustrative invoices raised on the members of the society?
Being aggrieved, the applicant filed an appeal before AAAR wherein the following contentions were submitted
a.     It is submitted that the ruling was passed without considering the judgement passed by Honourable Supreme court in the case of State of West Bengal Vs. Calcutta Club Limited.
b.     Further AAR have based their ruling on the basis of circulars and notifications issued by CBIC issued under GST.
c.      They are not carrying out any business as per Section 2(17) of CGST Act 2017 as the main objective is maintenance of society and is not engaged in any trade.
d.     Reliance has been placed by the applicant on the following cases pronounced by the Maharashtra AAAR
1)     M/s Lions Club of Poona Kothurd
2)     M/s Rotary club of Mumbai Western Elite.
In the above cases, it was asserted that the society charges which are meant toward meeting the administrative expenses of the society are similar to membership fees collected by the club and the same shall not be construed as “Consideration”. Therefore, society charges shall not be subject to GST.
e.     Reliance had also been placed on the favourable high court judgements which are as follows
1)     M/s Saturday Club Limited.
2)     M/s Sports Club of Gujarat Limited.
Maharashtra AAAR ruled that activities carried out by the appellant would amount to ‘Supply’ on the basis of the following
·         All the activities of Appellant would rightly get covered under the definition of term ‘business’ as provided under section 2(17)(e) of the CGST Act,2017, which unequivocally stipulates that 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 would be included under the meaning of the term business.
·         The term ‘service’ has been rendered a very wide connotation. It is clear that the activities undertaken by Appellant would rightly be covered under scope of the term ‘service’.
·         Since the Appellant is providing services to its members against the consideration named as ‘society charges’ in the course or furtherance of business, therefore, the activities would be construed as ‘supply’ in terms of Section 7(1)(a) of the CGST Act ,2017 , and accordingly will be liable for GST.
·         As regards the second question raised i.e. whether they are correctly discharging their GST liability, the AAAR agreed with ruling of AAR wherein they have held that it cannot be answered in terms of Section 97(2) of the CGST Act, on the premise that the AAR can only comment on the determination of the liability as to whether any supply of goods or services or both are liable for GST or otherwise but cannot comment on the computation or assessment of the tax liability.
The tussle regarding levy of tax on goods or services provided by club or society to its members is continuing in GST regime as well inspite of favourable decisions rendered by Supreme Court on the similar issue in the erstwhile regime. Nonetheless, it appears that the dispute will be settled by Supreme Court for provisions contained in GST regime as well.

This is solely for educational purpose.
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GST UPDATE ON LEVY OF GST ON CONTRIBUTIONS RECEIVED FROM MEMBERS OF SOCIETY 157/2020-21

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