TMI Blog2018 (12) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... apers and are also organizing, teaching and training courses, conferences, seminars and lectures and also publishing journals, pamphlets, reports, books and booklets in this regard. The applicant are basically drafting certain codes and standards and are directly as well as indirectly ensuring that member banks adhere to these standards and codes and thus provide banking services as per these codes and standards and thus the credibility of services of member banks increases if they are able to provide services as per codes and standards as drafted for adherence by the applicant. For performing the said activities, the applicant requires funds which are collected by them in the form of Annual Membership Fees and registration fees. Even though these fees are not used by them, it is clear that the said fees which are termed by them as corpus fund are used to generate interest amounts which are further used for performing their activities. In other words if there is no fee there is no corpus fund and no interest payment which can be used to fund their activities which are in the form of supply of services to their member banks. Thus here there is no doubt that consideration is fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant, seeking an advance ruling in respect of the following question : Whether GST is liable to be paid on the contribution made by Members towards Annual Membership Fees and registration fees to the Corpus Fund of BCSBI and recurring expenditure being incurred. 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 such 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, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus - STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) RAISED: FACTS: 1. The Applicant, Banking Codes Services Board of India is a Society registered under the Societies Registration Act, 1860 and is also registered as a Public Trust under the Mah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des and Standards currently in vogue in and outside India. iv. To enter into covenants with Banks on observance of the codes and standards and for that purpose to train employees of such Banks about the Banking Codes. vi. To advertise and publish promotional literature in newspapers and otherwise about the Codes and Standards for the guidance and knowledge of the public through Web site, advertisements in the newspapers, magazines, journals, TV/ Radio, hoardings or any other mode which the Society may deem fit. vii. To take up specific assignments, if any, in the areas coming under the Society s objects as projects, turnkey solutions or on any other terms of contracts with in-house resources or with the participation of outside agencies in order to fully implement the Code. viii. To organize teaching and training courses, conferences, seminars, lectures and similar other activities relating to the Codes and Standards or implementation of the said Codes and Standards. ix. To publish journals, reports, pamphlets, books, booklets, research papers in furtherance of the objects of the Society. x. To maintain close contacts with Indian Banks Associati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consideration as defined under Section 2 (31) of the CGST Act, 2017. Under the CGST Act, 2017 and the Rules made thereunder, GST is levied on Supply of goods or services or both. Section 7 of the CGST Act, 2017 defines the term Supply as under: SUPPLY : 7. (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; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commencement or closure of business; (e) 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; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) services provided by a race club by way of totalisator or a licence to book maker in such club; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; A sum total of the analysis of the terms Supply , Consideration and Business would make it clear that the activity of the Applicant does not fall under either of them, as discussed herein under: SUPPLY : It is clear from the definition of Supply that firstly the same involves all forms of supply of goods or services. In this regard, there is no question of any goods in this case. As such, it is to be seen whether any service is provided by the Applicant. As alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire fund collected by way of contribution from Member Banks is towards the Corpus and only the interest earned from this Corpus is used for public awareness programmes and day-to-day expenses of the Applicant Board. Thus, there is no activity, which amounts to business to attract GST. 1. The entire activity of the Applicant is squarely covered under the Principle of Mutuality and not exigible to GST: The Applicant is registered as a Charitable Institute and there is no activity such as a Supply or business carried out by them, as discussed above. However, even in cases, where Clubs and Associations have collected subscriptions from their members and have provided facilities to such members, various High Courts and Tribunals have held such activities not eligible to Tax on the Principle of Mutuality. Principle of Mutuality is guided by the gospel that No man can trade with himself; he cannot make, in what is its true sense or meaning, taxable profit by dealing with himself . Mutuality principle offers a tax shelter, as long as its character of a mutual association is retained, with its income not tainted by commerciality. A formal organization ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax, alike. The more important case laws are as below: Principle of Mutuality was considered in C. I. T. V Bankipur Club 1998 (109) STC 427 (SC) = 1997 (5) TMI 392 - SUPREME COURT . These principles are applicable and have been applied by the Calcutta High Court in Saturday Club ltd. (2005 (180) E.L.T. 437 (Cal.)) =2004 (6) TMI 11 - HIGH COURT CALCUTTA as concurred to in Dalhousie Institute (2005 (180) E.L.T. 18 (Cal)) = 2004 (6) TMI 10 - HIGH COURT CALCUTTA . (EXHIBIT A-1 to A-3). 2012 (26) S.T.R. 401 (Jhar.) = 2012 (6) TMI 636 - JHARKHAND HIGH COURT IN THE HIGH COURT OF IHARKHAND AT RANCHI, Prakash Tatia. CJ. and Aparesh Kumar Singh. J. RANCHI CLUB LTD. Versus CHIEF COMMR. OF C. EX. S.T.. RANCHI ZONE W.P. (T) No. 2388 of 2007, decided on 15-3-2012 Club - Incorporated as Company and formed on principle of mutuality - Liability to Service tax for services utilised by members of club, viz. mandap keeper, etc. - HELD : In view of mutuality, if club provides any service to its members, it is not a service by one legal entity to another, and is not liable to Service tax - Explanation to Section 65 of Finance Act, 1994 that taxable ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Appeal No. ST/118/2007 . Commercial Training or Coaching service - Charitable trust - Profits earned cannot be distributed among members of appellant - Surplus to be given to similar body on dissolution - Members required to contribute towards liability but no share of surplus given nor any dividend given - Memorandum of association showing appellant not a commercial concern - Programmes conducted in the nature of continuing education - Objective is professional development and not to impart skills for particular job or examination - Programmes not covered under commercial training or coaching - Appellant not covered under relevant service - Sections 65(26), 65(27) and 73 of Finance Act, 1994. [paras 4.5, 4.7, 4.10] Club or Association service - Receipts without return - Member not entitled to any specific service in return - Institutions also become members - Membership fee to be paid without expecting any return - Revenue not brought out the services or advantages received by members on paying fees or other amount - Service tax not leviable on amounts received from members, member-institutions and trade - Sections 65(25a) and 73 of Finance Act, 1994 . [paras 4.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and standards for the service by Banks as per the code which are drafted by applicant. For this, the Applicant Board conducts Public Awareness Programmes across India- The expenses Of which are from the interest earned from corpus fund at present. f. No any kind of benefit or facility is extended to the Member Banks by the Applicant Board. In view of the above facts, the Applicant is of the view that their activity is not covered under Supply and the contribution to the Corpus Fund received by them does not fall within the purview of Consideration . Also, in identical cases of taxation under various Statutes such as Income tax, VAT/ Sales Tax and Service Tax the various High Courts and Tribunals have held that no tax is leviable on services provided by Associations and Clubs to its own Members out of the subscription collected, on the Principles of Mutuality. The above facts, therefore, support the contention of the Applicant Board that they are not liable to Goods and Services Tax. Additional Submission in Advance Ruling Application for Banking Codes And Standards Board of India We are thankful for the patient hearing given on 25-04-2018. Our Clients ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons . As such, if the transaction under question does not fall within the ambit of Supply , then the same cannot also come under the purview of Consideration as the Consideration has to be in Consonance with Supply. In the case of the Applicant there is no element of Supply as envisaged under CGST Act, 2017 as there is no transaction constituting sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made by the Member Banks to BCSBI, the Applicant herein. Further, in the case of the Applicants, they are not receiving any Consideration from their Member Banks . The Applicant issues advise of Annual Membership Fee to the Member Banks. Para 1 Para 2 of the Letter written to Bank, is reproduced as under: 1. As yon may be aware, the funding support from RBI which available to BCSBI since its inception has ceased from 2016-17 as per arrangement agreed earlier. Accordingly, from the year 2016-17, BCSBI has to be self sufficient for meeting its expenses. We are pleased to inform you that with co-operation front all its Members, BCSBI has been able to meet all its expenses out of its own income since last two years. 2. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Corpus Fund of BCSBI and the interest earned on such contribution is used for the activities of BCSBI. The Corpus Fund is needs to be understood in the right perspective, which will establish that the contribution to Corpus Fund by each Member will not constitute as Consideration , in any manner and the same cannot be taxed under GST. CORPUS FUND Corpus Fund is the fund generated and kept for the existence and sustenance of the Organization. For a charitable organization, Corpus Fund are of paramount importance. Normally a corpus fund denotes a permanent fund kept for the basic expenditures needed for the administration and survival of the organization. The corpus fund is generally not allowed to be utilized for the attainment of the purposes, but the interest/dividend accrued on such fund can be utilized for its activities as well as accumulated. Corpus funds are generally created out of corpus donation. A donation will be treated as corpus donation only if it is accompanied by a specific written direction of the donor. In the absence of any written direction of the donor, a contribution or grant cannot be transferred to Corpus Fund but for all practical purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It s Member Banks are not separate from each other and they are the species of mutual undertaking, as discussed in detail in Supreme Court Order in Bankipur Club Ltd. =1997 (5) TMI 392 - SUPREME COURT , which is decided in the year 1997. The Hon ble Supreme Court has relied upon many English Judgments while reaching to the conclusion of Principles of Mutuality . The said principle has its relevance in all the taxations laws i.e. Income Tax, Service Tax VAT and has universal application. Principle of Mutuality has its implication in all statute as the foundation fact as there is no existence of two separate legal entities. The Applicant has relied upon various Judgments beginning from EXHIBIT A-1 to EXHIBIT B-3 and also certain latest Service Tax Judgments have been submitted during the hearing. The issue is no more res integra as decided by Hon ble Supreme Court, various High Courts and Tribunals throughout India for all taxing Statutes, Mere change in taxing Statute cannot make change in fundamental concepts. iii. IT SHOULD BE IN THE COURSE OF OR IN FURTHERANCE OF BUSINESS: For any activity to be considered as Supply , these 3 elements have to be fulfilled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who have their Branches in India. The Applicant prepares the Codes of Banks commitment to Customers, which is in consonance with the basic frame line provided by the RBI related to consumer protection. While becoming a Member of the Applicant, the Banks undertake to adhere to the Codes of Banks commitment to Customers and guidelines prescribed by the Applicant. These guidelines are for the benefit of people who undertake any transaction with banks such as their Account Holders etc. This is an obligation on the Banks and the Applicant Association is not providing for any benefit or facility to them being a Member, in any manner. The Applicant Association undertakes research and related work to prepare the Codes of Banks commitment to Customers that are mandatory on their Member Banks. There is no provision of any benefit or facility provided by the Applicant to its Members. From the above submissions, it is amply clear that the activity of the Applicant does not fall under the ambit of Business , at all. In view of the detailed submission made herein above and the submission made in the Application and the submissions made during the hearing in the matter, it is evident that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in newspapers and otherwise about the Codes and Standards for the guidance knowledge of the public through Web site, advertisements in newspapers, magazines, journals, TV/ Radio, hoardings or any other mode which the Society may deem fit. 2. To organize teaching and training courses, conferences, seminars, lectures and similar other activities relating to the Codes and Standards or implementation of the said Codes and Standards. 3. To publish journals, reports, pamphlets, books, booklets, research papers in furtherance of the objects of the Society. BCSBI raises annual invoices upon its member banks and intern the member banks pays annual membership fees in monetary terms. On the backdrop of the above it is evident that the BCSBI fulfills the ingredients as per the relevant definition under section 2 as follows: Section 2(84) person includes- society as defined under the Societies Registration Act, 1860: trust and Section 2(17) business includes- any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their ARA. No person as present from the side of Jurisdictional GST office. The application was accepted and was scheduled for final hearing on 04.04.2018 but the applicant requested for adjournment in the matter for personal reasons. Shri Jasbir Singh, Inspector appeared and stated that they had not received copy of application, however copy of notice was received by them. The copy of application was given and he was requested to ensure appearance or submission by next date of hearing. The final hearing in the matter was held on Ms. Kirti S. Bhoite, Advocate along with Sh. Phanraj Jain, C.A. and Sh. H. S. Sharma, Sr. V.P. appeared and reiterated the contention as made in their ARA and submissions made therewith. Sh. Anil Khude, Asstt. Commr. of SGST Mumbai appeared and stated that they would be making submissions within one week. The applicant also requested to grant them further time till i.e. on 02.05.2018 for making further submissions in the matter which was considered. The applicant made further submissions on 02.05.2018. Certain further clarifications were sought from the applicant which were received by this authority on dated 30.07.2018. 05. OBSERVATIONS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking various activities which are as under: i. To plan, evolve, prepare, develop, promote and publish voluntary comprehensive Codes and Standards for Banks, for providing for fair treatment to their customers. ii. To function as an independent and autonomous watchdog to monitor and to ensure that the banking Codes and Standards voluntarily adopted by Banks are adhered to in true spirit by Banks in delivering the services, as promised, to their customers. iii. To conduct and undertake research of the Codes and Standards currently in vogue in and outside India. iv. To enter into covenants with Banks on observance of the codes and standards and for that purpose to train employees of such Banks about the Banking Codes. v. To advertise and publish promotional literature in newspapers and otherwise about the Codes and Standards for the guidance and knowledge of the public through Web site, advertisements in the newspapers, magazines, journals, TV/Radio, hoardings or any other mode which the Society may deem fit. vi. To take up specific assignments, if any, in the areas coming under the Society s objects as projects, turnkey solutions or on any oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormulate their own codes and standards for their services to their customers. Thus we find that a very crucial function which the banks would have been required to perform in one way or the other is being performed by the applicant on their behalf and for their benefit in terms of winning confidence of customers about their services. And because of this activity of the applicant it can be stated that it would be one of the factors that would probably lead to good business for the Bank in terms of more clients. Publishing literature, advertisements, etc representing their member banks implies that the public at large are being made aware about their member banks, which would tantamount to supply of service to the said member banks. Secondly we are required to ascertained if these services are for a consideration or otherwise as we find that the second part of the definition says that .all forms of supply of goods or services .for a consideration. For performing the said activities, the applicant requires funds which are collected by them in the form of Annual Membership Fees and registration fees. Even though as per their submissions these fees are not used by them, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is framing Codes of Bank s commitment to Customers for its Member Banks. The very fact that they are framing Codes and Standards of Bank s commitment to Customers of the banks shows that they are into supply of services to their member clients who are banks and are thus promoting credibility of services of these banks to their customers. They have also submitted that membership to banks are optional which clearly implies that the Member Banks are not under any legal compulsion to become members. The obtaining of membership implies that the applicant would supply various services to Banks only on becoming members. Non-members would not be served by the applicant. The applicant has submitted that RBI provides for guidelines, which are mandatory for each and every bank i.e Co-Operative Banks, Scheduled Banks, Non-Scheduled Banks, Nationalized Banks, Foreign Banks who have their Branches in India. The Applicant prepares the Codes of Banks commitment to Customers, which is in consonance with the basic frame work in line provided by the RBI related to consumer protection, but this supply of service is only to member banks and not to banks who have not become members. The applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n function . The essence of the principle of mutuality is present only in situations where a group of persons form an association and contribute to constitute income of the associations in the nomenclature of a common fund, which so collected is used for the benefit of the members. Here the member banks have not come together contributing their resources to form the board like that of the applicant and for the benefits of the members themselves. In the present situation there is no compulsion under any enactment for the member banks to become the member of the applicant since the membership of the applicant body is voluntary. Hence the principle of mutuality is not at all applicable in present case. It is also mentioned that Banks have been constituted as per The Banking Regulation Act, 1989 and are a separate legal entity from the applicant body. The Principal of mutuality says that a person cannot make profit from himself. It can be clearly seen that Banks in India have been in existence a lot prior to the year 2006, when the applicant body was formed for the purpose of creating awareness and ensuring the correct following of the Codes and Standards for Services by the Banks in I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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