TMI Blog2020 (2) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... d) of the Indian Contract Act, 1872, consideration needs to necessarily flow from one person to another. In the Finance Act, 1994, the taxable event in terms of Section 66B was on services provided or agreed to be provided by one person to another . Under GST, the taxable event is the supply of goods or services or both. As already mentioned, supply though not defined has been explained in Section 7 of the CGST Act, 2017 to cover the activities stated therein made in the course or furtherance of business. Under GST law, the term business has been specifically defined in Section 2(17) of the CGST Act to include provision by a club, association, society or any such body (for a subscription or any other consideration) of facilities or benefits to its members. Thus, there is a marked difference in the concept of the levy between the Finance Act and the CGST Act. Thus, there is a supply of service by the Appellant to its members and the same is taxable under GST. Whether in terms of entry No.77 of the N/N. 12/2017- Central Tax (Rate) Dated 28-06-2017 as amended by the N/N. 02/2018-CentraI Tax (Rate) dated 25-01-2018, the contribution received by the association from its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vaishnavi Splendour Homeowners Welfare Association , (herein after referred to as Appellant) against the advance Ruling No. KAR/ADRG 47/2019 Dated: 17 sept 2019 = 2019 (11) TMI 155 - AUTHORITY FOR ADVANCE RULING, KARNATAKA . Brief Facts of the case: 3. The appellant is an association of apartment owners in the condominium known as Vaishnavi Splendour . The association has 88 members and each of them contribute towards the maintenance of common areas/ facilities, lightings in the common areas, water, etc. The contributions of each member work out to more than ₹ 7500 per month. 4. The appellant filed an application for Advance Ruling under section 98 of the CGST Act, 2017 and KGST Act,2017 on the following question: (i) Whether the applicant is liable to pay CGST and SGST on the amount of contribution received from its members? (ii) If yes, whether it can avail the benefit of Notification No 12/2017 CT(R) dt 28.06.2017 (SI.No. 77) read with Notification No 02/2018 dt 25.01.2018 which provide for exempting from tax, the value of supply upto an amount of ₹ 7500/- per month per member? (iii) lf the answer to (ii) is yes , whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 6.2. Appellant further submitted that GST is leviable only in the circumstances where there is existence of privity of contract between the supplier and the recipient. When the members association effects any supplies to its members, the supplier and the recipient are one and the same and therefore, there is an absence of privity of contract. Accordingly, there cannot be any charge of GST on such transactions. 6.3. Appellant further submitted that the Authority for Advance Ruling is a quasi-judicial authority; that quasi- judicial authorities are bound to decide the matters independent of departmental circulars; that departmental circulars clarifying the departmental stand on the matter cannot be the basis for the decision by the authority. Yet, Authority has given the ruling by merely following the CBIC Circular No. 109/28/2019-GST dated 22-07-2019. They contended that the ruling given by merely quoting the circular is not a speaking ruling. 6.4. They submitted that departmental circular would operate only prospectively by virtue of being in the nature of an oppressive circular. They relied on the Supreme Court judgments in the case of Commissioner of Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant are outside the scope of supply and consequently, outside the scope of the tax net. Therefore, the contributions are not taxable. 7.3. The Appellant has placed reliance on the decision of the Honourable Supreme Court in the case of State of West Bengal vs. Calcutta Club Limited reported in Civil Appeal No. 4184 of 2009 which was decided on 03-10-2019 = 2019 (10) TMI 160 - SUPREME COURT wherein the Hon ble Supreme Court observed as under: 3. It was contended before the tribunal that there could be no sale by the respondent club to its own permanent members, for doctrine of mutuality would come into play. To elaborate, the respondent club treated itself as the agent of the permanent members in entirety and advanced the stand that no consideration passed for supplies of food, drink or beverages, etc. and there was only reimbursement of the amount by the members and therefore, no sales tax could be levied : Thus, the Honourable Supreme Court made it clear that the Constitution of India doesn t enable the State Legislature or the Parliament to make any law by which members contributions to their association can be made taxable. 7.4. In the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CGST Rules which provides for excluding amounts received as reimbursement of expenses from the value of supply of goods or services or both. 7.7. Regarding the availment of benefit of Notification No.12/2017 dated 28-06-2017 as amended vide notification No.2/2018 dated 25-01/2018, the said Notification provides for exemption from tax, the value of supply up to an amount of Rs,7500 per month per member. In this regard, they stated that Homeowners Associations enjoyed exemptions from tax even in the service tax regime. In this regard they referred to the Notification No 08/2007 - Service Tax dated 01.03.2007 where the taxable services provided by a resident welfare association was exempted from the whole of service tax provided the total consideration received from individual members does not exceed ₹ 3000 per month. Further, Notification No 25/2012-ST dated 20.06.2012 exempted from service tax contributions upto an amount of ₹ 5000 per month per member; an analysis of the above Notification reveals that contributions which was less than ₹ 5000 per month per member was fully exempted from tax while contributions which was more than ₹ 5000 per month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellant also contended that the ruling pronounced by the Authority after the mandated period of 90 days is unsustainable in law. They relied on the Supreme Court decision in the case of Danish Aarthi vs M. Abdul Kapoor (CRP (NPD) (MD) No 475/2004 and CRP (NPD) (MD) 476/2004 = 2009 (1) TMI 919 - MADRAS HIGH COURT wherein it is held that if a thing is prescribed to be done within a particular period, it shall be done within that period or shall not be done at all. In view of the above grounds, the Appellant prayed that the ruling passed by the Authority in their case be set aside. DISCUSSIONS AND FINDINGS 8. We have gone through the records of the case and considered the submissions made by the Appellant in their grounds of appeal, at the time of personal hearing as well as in their additional submissions. 9. There are two issues to be decided by us, viz: Whether the activities of the association of apartment owners are liable to tax under GST as a supply? If so, whether in terms of entry No.77 of the Notification No. 12/2017- Central Tax (Rate) Dated 28-06-2017 as amended by the Notification No.02/2018-CentraI Tax (Rate) dated 25-01-2018, the contribution r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dule 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 authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. 12. Therefore, for an activity to qualify as supply in terms of Section 7 of the CGST Act, the following ingredients must be satisfied: (i) There must be a supply of either goods or services or both; (ii) The activity should be undertaken for a consideration (iii) The activity should be in course or furtherance of business 13. Section 2(102) of the CGST Act defines services to mean anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. The word anything used in the said defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions between the association and its members is a service. The only question that now remains is whether the said service has been provided for a consideration? 15. Section 2(31) of the CGST Act states that Consideration in relation to the supply of goods or services includes (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services, whether by the recipient or by any Other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, whether or not voluntary , in respect of, in response to, or for the inducement of, the supply of goods or services, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: PROVIDED that a deposit, given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies the deposit as consideration for the said supply; In the instant case, the monthly contribution made by the members to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Act to include provision by a club, association, society or any such body (for a subscription or any other consideration) of facilities or benefits to its members. Thus, there is a marked difference in the concept of the levy between the Finance Act and the CGST Act. In terms of the Finance Act, it was sufficient that a service was rendered by one person to another for a consideration in the taxable territory for the levy of service tax to be attracted. However, under GST, the supply of the service should necessarily be in the course of or furtherance of business and business has been defined to include a club, association, society or any such body which provides facilities or benefits to its members for a subscription. 18. The doctrine of mutuality was examined by the Supreme Court in the context of the Sales Tax law and was applied on all fours to service tax. The Supreme Court after going through the various legal provisions of the Finance Act from the introduction of service tax in 1994 till the shift in the system of taxation of services in July 2012, held that, there was no levy of service tax on members clubs in the incorporated form. We are therefore of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bench of Five Judges in the case of Commissioner of Customs (Import) Mumbai Vs. M/. Dilip Kumar and Company and Ors (Civil Appeal No. 3327 OF 2007) = 2018 (7) TMI 1826 - SUPREME COURT has held that the benefit of ambiguity in exemption notification cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue/state. Exemption notifications are subject to strict interpretation. We find that the Advance Ruling Authority had correctly interpreted this exemption Notification. The Circular No.109/28/2019-GST dated 22.07.2019 issued by the CBIC only clarifies this position. The Appellant has argued that this Circular will apply only prospectively since it is oppressive in nature. This argument does not hold water since the said Circular does not introduce any new levy by its clarifications. The position regarding the exemption from GST was always applicable only when the individual member s contribution per month was within ₹ 7500/-. The Circular dated 22.07.2019 only clarified this position and did not bring in any new levy. Hence the question of applying the Circular prospectively does not arise. 21. The Appellant has also contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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