The Authority for Advance Rulings (AAR), West Bengal has held that a Club is liable to pay GST on the consideration received from the subscriptions, sponsorship fees and the sale of souvenirs.
The applicant, the Association of Inner Wheel Clubs in India is affiliated to International Inner Wheel, one of the largest women’s service voluntary organizations in the world active in more than 103 countries, and the organization is involved in social welfare work with the aim of helping people live better lives. They provide financial and other practical support to the financially disadvantaged classes, including people suffering from natural disaster or in war-torn regions and accumulates funds through subscriptions, sponsorship fees, the sale of souvenirs etc.
The applicant approached the Advance Ruling Authority seeking a clarification on their liability to pay tax under the new GST regime.
The Authority noted that the Inner Wheel Clubs have specific objectives and members are granted various facilities and/or benefits, enabling them to attend conventions/meetings for the furtherance of the objectives of the Organisation, against subscriptions or fees, renewable annually.
“In other words, the annual membership subscription facilitates the member to further the objectives of the Organisation and be associated with other similar organizations, both nationally and globally, arranged for by the Organisation. Such facilities/benefits are not available to the non-members of the Organisation,” the authority said.
“Charitable Activity” under GST is clearly defined under clause 2(r) of Notification No 12/2017-CT (Rate) dated 28.06.2017. The activities undertaken by the Applicant do not conform entirely to the definition. At best, the activities undertaken by the Applicant may be broadly defined as social welfare activities. Such activity by an entity is an “adventure” and maybe be treated as a business under Section 2(17)(a) of the GST Act, and a taxable supply of service if consideration is charged from the recipient. 10. However, the Applicant also has activities which involve providing space for advertisements, raising sponsorship etc, and the transactions regarding these activities are, therefore, business transactions within the meaning of section 2(17)(b), being transactions undertaken in connection with or incidental or ancillary to the social welfare activities of the Applicant, and are supplied in terms of Section 7(1) of the GST Act. Such services are classifiable under SAC Heading 99836 under the category ‘Advertising services’. Sale of souvenirs is to be treated as a supply of goods,” the authority said.
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