The Maharashtra Authority of Advance Ruling (AAR) has held that GST Payable on Membership Fee collected from Members of the Club.
The applicant, Poona Club Limited submitted that all services or goods supplied/provided to all types of members are charged specifically at rates determined by the club, as and when the members utilise any facility of the club. The capital funds are raised exclusively through membership fees at the time of giving membership. As per the article. 9C, 60% of the membership fees received shall be put in the club’s cash reserves. As a policy balance, 40% is transferred to general reserves. Thus membership fees collected from all members are capitalised as corpus funds of the club and are either invested in financial assets or are mainly spent for the creation of assets of the club.
The applicant has sought the advance ruling on the issue of whether membership fee collected from members at the time of giving membership is liable to tax under CGST/SGST Act and whether the annual subscription and annual games fee collected from members of the club is liable to tax under CGST/SGST Act.
The applicant has submitted that, the ordinary meaning of “business” requires a profit motive to be established. The applicant has reproduced the definition of the term “business” defined u/s 2) of CGST Act 2017 and has stated that even though clause (e) of the said Section 2 (17) mentions that the 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 as the case may be’, is termed as “business”, it is clear that profit motive is not ousted from the said sub-clause (e).
Further the applicant has also submitted that assuming but not admitting that profit motive is not required in sub-clause (e), it is well settled that where the main objects of the entity is not of a “commercial nature”, then that activity cannot be called “business”, whether or not the Legislature makes profit motive irrelevant.
The very term “business” requires commercial character. Sub-clause (e) ultimately occurs within the definition of “business and therefore there must be some underlying commercial nature to the main objects of the club. As the main objective of the club is the promotion of sports activities, there is no commercial nature.
The coram of Rajiv Mangoo and T.R.Ramnani has held that membership fee collected from members at the time of giving membership is liable to tax under CGST/SGST Act. The AAR has ruled that the annual subscription and annual games fee collected from members of the club is liable to tax under CGST/SGST Act
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