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2019 (11) TMI 477

..... rs and pooled together only for paying meeting expenses and communication expenses - amount so collected is deposited in a single bank account - there is no furtherance of business in this activity and neither any services are rendered nor are any goods being traded - challenge to AAAR decision - condonation of delay in filing appeal. HELD THAT:- The appellant was prevented by a sufficient cause from presenting the appeal within period of thirty days from the receipt of the said ruling of AAR and accordingly allow the appellant to present the appeal within a further period of 30 days in terms of proviso to sub section 2 of section 100 of the CGST Act 2017. Merits of the case - Whether the Clubs or Associations and the members thereof can be considered as distinct persons or not? - HELD THAT:- We are only concerned with the element of service, if any, rendered by the club to its members against some consideration, which may be in the form of the entrance fee or membership fee. Therefore, the contention made by the Respondent with regard to the principle of mutuality to establish their claim that the club and its member are not distinct entity is not tenable in so far as taxability i .....

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..... dy (for a subscription or any other consideration) of the facilities or benefits to its members will surely attract GST irrespective of the fact that such club is not set up with the objective of providing any goods or service to its members. Hence, the observation of AAR does not hold any legal ground. The ruling made by AAR is set aside and subsequently it is held that Lions Club of Poona Kothrud, on account of the activities undertaken by them, is liable for taking registration for discharging their GST liability. - MAH/AAAR/SS-RJ/32/2018-19 - 23-4-2019 - SMT. SUNGITA SHARMA, AND SHRI RAJIV JALOTA, MEMBER PROCEEDINGS (under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) 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 provisions under the MGST Act. The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Good .....

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..... e expenses. Surplus, if any, is used for charitable activities. 2. In this regard, the following submissions are made. 2.1 Legal position from 01-07-12 to 30-06-17: There seemed to be a fact that the club and members were not distinct persons, levy of service tax on such clubs/ associations was not to be warranted. Principally, there should be existence of two sides/entities for having transaction as against consideration. In a member s club, there is no question of two sides - members and club, both are the same entity. However, with effect from 1-7-2012, the word service has also been defined under Section 65 (44) of the Finance Act, 1 904, the excerpt of the definition is as under; service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a)__________ (b)__________ (c)__________ Explanation 3. - For the purposes of this Chapter, (a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b)________ Explanation 3(a) to the said Section states that for the purposes of this Chapter, an unincorporated association or a body of pe .....

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..... covered within the scope of supply under Section 7 of the CGST Act, 2017. Hence the same shall be taxable and registration and other formalities shall be followed. 7. The respondents have nowhere expressly submitted and committed that they are not engaged in the activities which may amount to facilities or benefits to its members. This is very much essential to decide whether the Applicant falls in/out of purview of the definition under business , as envisaged under section 2(17) of CGST Act, 2017. On the contrary, the written submission states that the Seminars and Institutes for Leadership Development and other forums are only for Lions members and non-lions are not allowed to take part. Thus, funds received from members are utilized for mutual benefit of members. 8. It is pertinent to note here that in the written submission dated 04.07.2018, the respondent himself has stated that -"Administrative and Annual convention cost of Lions Clubs international and similar District costs also programs, seminars and Institutes for Leadership Development and other forums and these programs are only for Lion members and non-lions are not allowed to take part. Thus, funds received from .....

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..... filing the appeal is not mentioned neither identified. In the instant case, the appellants application for condonation of delay is highly casual in nature, it lacks material particulars and do not disclose sufficient cause for the condoning the delay. Holding thus, the High Court denied to condone the delay and dismissed the appeal. [Lifelong Media tech (P) Ltd. v. United India Insurance co. Ltd. 2018 SCC On Line Del 9559 dated 03-05-2018]. 13.2. Nature of Receipts of Clubs and District Cabinet Major heads of Receipts are mentioned below with reasons as to why they may be considered as Non-Taxable: Nature of Dues Submission as to why they should not be subjected to GST Club Membership fess Club is an autonomous body; Member pays fees out of which Expenses are met that generally are in the form of:- i) Meeting Expenses ii) Printing of Circulars iii) Stationery iv) Postage v) Greetings vi) Fees payable to International office vii) Fees payable to Multiple office It can be seen that the amounts collected by way of fees are only pooled together for the sake of convenience. No other facilities or benefits such as sports, fitness, recreation, lifestyle, entertainment and personal transp .....

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..... mmon fund, nor can they sell their share. Cessation from membership would result in the loss of right to participate without receiving a financial benefit from the cessation of the membership. 13.4. Clauses in Body of Individual Agreement The Body of Individuals may collect funds from each member as decided from time to time on its membership Such funds collected shall be utilized only for paying Members meeting expenses for formulation of policies and directions; administrative expenses, office supplies; communication and such other incidental expenses for updating education for the purpose of carrying on Service activities in a better manner. The Members shall not be entitled to any facilities whatsoever such as sports, fitness, recreation, lifestyle, entertainment and personal transportation etc. 13.5. Incorrect claim in Departmental Appeal as to Declaration of No facilities provided : It is stated on the page no. 3 of the Form ARA - 03, in the appeal filed by the department as, The applicant have nowhere expressly submitted and committed that they are not engaged in the activities which may amount to facilities or benefits to its members . (Emphasis provided) But in the submiss .....

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..... ted by a sufficient cause from presenting the appeal within period of thirty days from the receipt of the said ruling of AAR and accordingly allow the appellant to present the appeal within a further period of 30 days in terms of proviso to sub section 2 of section 100 of the CGST Act 2017. Now, we will discuss the appeal on merit. On perusal of the entire case records, placed before us, the moot issues are as under: (a) Whether the Clubs or Associations and the members thereof can be considered as distinct persons or not. (b) Whether the activities, undertaken by the Respondent by way of organizing the Leadership program exclusively for their Lion members, can be considered as service or not. (c) Whether the fee collected by the Respondent i.e. the Lions Club from its members in the form of entrance fee and annual membership fee can be treated as consideration or not. (d) Whether the transaction between the Respondent i.e. Lions Club and its members can be construed as supply or not. 17. Now, to start with our discussion, we will first examine the issue (a), enumerated above, which is whether the Club or Association and the member thereof can be considered as distinct persons or n .....

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..... any, rendered by the club to its members against some consideration, which may be in the form of the entrance fee or membership fee. Therefore, the contention made by the Respondent with regard to the principle of mutuality to establish their claim that the club and its member are not distinct entity is not tenable in so far as taxability in the GST regime is concerned. 18. Further, coming to the issue no.(b) i.e. Whether the activities, undertaken by the Respondent by way of organizing the Leadership program exclusively for their Lion members, can be considered as service or not. The Respondent have inter-alia submitted that they organize Leadership program exclusively for their Lion members, which covers the aspects of how to be a Game Changer - Management skills, Communication Skills, Executive skills, Leadership Skills etc., which clearly benefits the members of the Club, who have paid the subscription fee to become the Lion members. It is pertinent to note that these Leadership Programs are conducted only for the Lion members. Non-Lion members are not allowed to participate in such programs. Thus, by doing so, the Respondents have rendered activity for the benefit of its membe .....

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..... s, any membership fee collected by the Lions Club from its members will definitely be understood as consideration as the same has been paid for the supply of services. 20. Coming to the issue no. (d) i.e. whether the transaction between the Respondent i.e. Lions Club and its members can be construed as supply or not, we will first discuss the scope of term supply as envisaged under Section 7 of the CGST Act, 2017, the relevant portion of which has been reproduced herein under: (1) For the purposes of this Act, the expression supply includes- 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. Thus, the term Supply , under the GST Act, has got a very wide connotation due to the presence of the clause all forms of supply of goods or services or both However, barring specified exceptions and instances, prescribed under Section 7 of the CGST Act, the following two conditions have been imposed to be considered as Supply under GST Law: (i) that such supply should be made by a person for a consideration; (ii) that suc .....

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..... e causes of the club. They, further, observed that here too, the amounts spent are for building and empowering a human resource to help perform the activities of the club in a better way. On perusal of the observation made by the AAR, it is opined that the members of AAR have interpreted the definition of business by giving a restrictive meaning of facilities and benefits used in the inclusive definition of business by comprehending the same to be the activities such as recreation, sports, food etc., which are not there in the definition of the business provided in the CGST Act. Thus, they have not followed the literal rule of construction in so far as the interpretation of the definition of business under the CGST Act, 2017 is concerned. It is worth mentioning that the literal rule of interpretation is the most widely accepted rule of legal construction unless the meaning conveyed by literal rule is against the intent and spirit of the legislation. Thus, in the instant case, the AAR has erred by construing the term facilities and benefits only to the extent of recreation, sports, food etc., by going beyond the text of the legislation. The CGST Act has expressly defined the term bu .....

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