"MAHARASHTRA AUTHORITY FOR ADVANCE RULING GST Bhavan, Room No-107, 1st floor, B-Wing, Old Building, Mazgaon, Mumbai - 400010. (Constituted under section 96 of the Maharashtra Goods and Services Tax Act, 2017) BEFORE THE BENCH OF (1) Shri B. Timothy, Add]. Commissioner of Central Tax, (Member) (2) Shri A. A. Chahure, Joint Commissioner of State Tax, (Member) GSTIN Number, if any/ User-id 27TAACARS956P1ZP Legal Name of Applicant Rotary Club of Mumbai Western Elite Registered Address/Address provided | Kainya Business Park, S.V. Road, Malad West, while obtaining user id Mumbai - 400064 Corresponding Address 401, Advent Atria, 4th Floor, Opp. Kingston Tower, Chincholi Bunder Road, Malad (West), Mumbai, 400064 Details of application GST-ARA, Application No. 09 Dated 26.04.2019 Concerned officer State Tax Officer (C-140) Nodal -9, Mumbai Nature of activity(s) (proposed / present) in respect of which advance ruling sought A | Category B_ | Description (in brief) Rotary Club of Mumbai Western Elite (hereinafter referred to as ‘Rotary Club’) is an association of persons, joined together to undertake social activities without any profit motive. Funds collected as fees are pooled together to be expended for meeting expenses & administrative expenses. | Surplus, if any, is used for Charitable activities sslIssue/s on which advance ruling | (vi) whether applicant is required to be registered ‘egquired under the Act Reesor) on which advance ruling is | As reproduced in para 01 of the Proceedings below. » | requir l _ — — si PROCEEDINGS jt Je if J {Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra f Goods and Services Tax Act, 2017) The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively] by M/s Rotary Club of Mumbai Western Elite, the applicant, seeking an advance ruling in respect of the following question. “The amount collected by Rotary club is towards convenience of members and pooled together for paying meeting expenses, communication expenses, RI per capita dues, subscription fees to the Rotarian or Rotary regional magazine, district per capita assessment and the same is deposited in single bank account. As there is no furtherance of business in this activity and neither any services are rendered nor are any goods being traded, whether the above transaction can be considered as supply of goods or services to its Members under GST”? 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 reference is specifically made to any 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, the expression ‘GST Act’ would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT “1, Rotary International is an International organization whose stated purpose is to bring together business and professional leaders in order to provide humanitarian service and to advance goodwill and peace around the world. It is a non-political and non- sectarian organization open to all people regardless of race, color, creed, religion, gender, or political preference. 2. Rotary members believe that they have a shared responsibility to take action on our - world's most persistent issues. They have 35,000+ clubs which work together to: e Promote peace e Fight disease e Provide clean water, sanitation, and hygiene e Save mothers and children e Support education a e Grow local economies tary is made up of three parts: VA Rotary Clubs - Rotary clubs unite dedicated people to exchange ideas, BAA P | build relationships, and take action. by! Rotary International - Rotary International supports Rotary clubs worldwide j by coordinating global programs and initiatives. “ oimas Key c) Rotary Foundation - The Rotary Foundation helps fund our humanitarian ~ activities, from local service projects to global initiatives. 4. Rotary Club receives fees from its members: These can be purely said to be collected to defray its expenditure on meetings and communication, RI per capita dues, subscription fees to the Rotarian or Rotary regional magazine, district per capita dues, club annual dues, and any other Rotary or district per capita assessment. Rotary Club holds Programs, Seminars and Institutes for Leadership Development and other forums and these programs are only for Rotary Club members and non-members are not allowed to take part. Thus, funds received from members are utilized for mutual benefit of members. 5. As per By-Laws of the Rotary Club, the administration and working of the Club and implementation of policies are established and are implemented on the concept of mutuality. Each member is equally represented with individual identity and status 2 thereby, establishing the fact of complete transparency i.e. the identity between the contributors and the participators of the Club. Since the amount received by the Rotary Club exceeds Rs. 20 lakhs, being the threshold for registration under GST Act 2017, and in order to avoid any litigation, Rotary Club obtained GST Registration effective from 16.11.2017. STATEMENT CONTAINING APPLICANTS INTERPRETATION OF LAW _IN RESPECT OF THE QUESTIONS RAISED Le As per Section 9 of Central Goods & Service Tax Act, 2017 (\"CGST\"), levy of tax is on an event called 'supply'. Scope of supply is stated under Section 7 of CGST Act. The said section is reproduced below for ready reference: ‘Sec. 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 ACE RULip, Ss in Schedule II. JE set ag oy “association or club and its members, said transaction must either fit under clause (a) 4 a wae of the above section, it can be construed that to tax the transaction between ON of elduise (c) above. Clause (a) covers all forms of supply of goods or services or both P stich as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed aa be made for a consideration by a person in the course or furtherance of business. Hence following ingredients must be satisfied: a. There must be supply of goods or services or both for a consideration; b. And such supply must be in the course or furtherance of business It must be noted that both the ingredients must be satisfied to tax the transaction. If only one is satisfied, transaction cannot be taxed under the referred clause. 3. Under GST, the term 'business' is defined w/s. 2(17) of CGST. (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; b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; d e supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; 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; admission, for a consideration, of persons to any premises; 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; services provided by a race club by way of totalisator or a licence to book club; and any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; From the above definition, it is clear that for getting satisfied under the term \"business\", there must be facilities or benefits to its members. However, in the instant case, the members of the club come together only for social cause and there is no furtherance of any business of benefits or facilities to the members. 4. As per clause 7(1)(c) of CGST, the activities specified in Schedule I, made or agreed to be made without a consideration shall be considered as supply. Entry number 2 of Schedule I provides that supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business shall be taxable. Members are not covered under section 25 as distinct person. Hence only thing to be checked is whether an association and its sy db) o) % q@;: ~ members are related person. § Related Person is defined under Explanation to section 15 of CGST, reproduced below for ready reference: Fe ah Explanation. - For the purposes of this Act, persons shall be deemed to be “related persons\" if i) such persons are officers or directors of one another's businesses; ii) such persons are legally recognised partners in business; iii) such persons are employer and employee; iv) any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them; v) one of them directly or indirectly controls the other; vi) both of them are directly or indirectly controlled by a third person; vii) together they directly or indirectly control a third person; or viii) they are members of the same family; the term \"person\" also includes legal persons; persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. 6. On perusal of above list, one can conclude that there must be two or more persons who can be considered as related owing to the above conditions. As an association and its members are the same because of principle of mutuality, they cannot be regarded as related person. From the foregoing analysis, we conclude that transaction between an association or club and its members will not be covered within the scope of supply u/s. 7 of the CGST Act, 2017. Hence the same shall not be taxable. 7. Inthe context of GST, ‘persons’ are defined under section 2(84) of the CGST Act, 2017. As per said definition, there is no deeming fiction to treat association and members as different persons. Hence the key condition to tax a transaction under section 7(1)(a) of CGST, that supplier and recipient must be different, is not satisfied. Hence the transaction of providing services by an association to its members should not be taxed under section 7(1) of CGST. 8. Under Service Tax regime, Courts in several cases held that in absence of deeming fiction, treating club/association & its members as distinct person, service tax shall not be payable. In order to nullify the said decisions, w.e.f. 01.06.2012 clause (a) to Explanation 3 to Sec. 65B provided that an unincorporated association or body of persons, as the case may be and a member thereof shall be treated as distinct persons. However, such deeming fiction is not provided under the current GST regime. 9. Further, on the same facts as of the applicant, AAR Maharashtra in the case of Lions club ren of Poona Kothrud, [2018] 100 taxmann.com 222 has held has that fees collected from ~~ maembers cannot be brought within purview of GST. The question raised and the answer in the instant case is as under: Question: Since the amount collected by individual lions clubs and lions District is for convenience of lion members and pooled together only for paying Meeting expenses & : * The facts of the referred case law are similar to the facts of applicant's case as mentioned in the table above. Hence, the ratio of the above judgement should be applied to the applicant's case. 13: Further, various Courts and Tribunals have held that, in case, the club is for the benefit for the members, club and members shall not be considered as different persons for the purpose of levy of tax. Reliance in this regards in placed on following judicial precedents: 7 i) Commissioner of Income-tax v. Bankipur Club Ltd. [1997] 92 Taxman 278 (SC) wherein it was held as under: i ference It should be noticed that in the case of 'mutual society or concern' (including a 'Members' club’), there must be complete identity between the class of contributors and the class of participators. The particular label or form by which the mutual association is known, is of no consequence. The said principle which has been laid down in the leading decisions and emphasized in the leading English text books mentioned above, has been explained with reference to Indian decisions in \" The Law and Practice of Income Tax? (Eighth Edn., Vol. 1, 1990) by Kanga & Palkhivala at page 113, thus: ” .... 'The contributors to the common fund and the participators in the surplus must be an identical body. That does not mean that each member should contribute to the common fund or that each member should participate in the surplus or get back from the surplus precisely what he has paid’. The Madras, Andhra Pradesh and Kerala High Courts have held that the test of mutuality does not require that the contributors to the common fund should willy-nilly distribute the surplus amongst themselves: it is enough if they have a right of disposal over the surplus, and in exercise of that right they may agree that on winding up the surplus will be transferred to a similar association or used for yome charitable objects...\" Saturday Club Ltd. v. Assistant Commissioner, Service Tax Cell [2005] 1 STT 64 (CAL) wherein it was held as under: 17, Py héving transaction as against consideration. In a member's club there is no question of .... Therefore, principally there should be existence of two sides/entities for “two sides. 'Members' and 'club', both are same entity. One may be called as principal when the other may be called as agent, therefore, such transaction in between themselves cannot be recorded as income, sale or service as per applicability of the revenue tax of the country. Hence, I do not find it is prudent to say that members' club is liable to pay service tax in allowing its members to use its space as 'mandap’. iii) Sports Club of Gujarat Ltd. v. Union of India [2013] 35 taxmann.com 557 (Gujarat) wherein it was held as under: 8. In the result, these petitions are allowed and it is hereby declared that Section 65(25a), Section 65(105) (zzze) and Section 66 of the Finance (No.2) Act, 1994 as incorporated/amended by the Finance Act, 2005 to the extent that the said provisions purport to levy service tax in respect of services purportedly provided by the petitioner club to its members, to be ultra vires. Rule is made absolute with no order as to costs. [Emphasis Supplied] iv) Ranchi Club Ltd. v. Chief Commissioner of Central Excise & Service Tax, Ranchi Zone [2012] 22 taxmann.com 217 Charkhand HC) wherein it was held as under: IS) sizes this issue is no more res integra and issue is to be answered in favour of the writ petitioner and it can be held that in view of the mutuality and in view of the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another in the light of the decisions referred above as foundational facts of existence of two legal entities in such transaction is missing. However, so far as services by the club to other than members, learned counsel for the petitioner submitted that they are paying the tax 19. Therefore, this writ petition deserves to be allowed and it is held that rendering of service by the petitioner-club to its members is not taxable service under the Finance Act, 1994 and the writ petition of the petitioner is allowed accordingly. [Emphasis Supplied] v) Cricket Club of India Ltd. v. Commissioner of Service Tax [2015] 62 taxmann.com 2 (Mumbai - CESTAT) wherein it was held as under: 16. 'Clubs or associations' are entities that need funds to exist in the form that they have assumed or evolved. Wages of employees and costs of running the establishment, such as energy charges, maintenance and repairs etc., are necessary expenses for such sustenance. Implicit in membership of clubs and associations is the obligation to share in ich expenses. These are required for maintaining the assets of the club or association 1 which a service provider may or may not be contracted but the contributing members not the direct beneficiaries of such services. Contribution to expenses cannot, by PA s any stretch, be deemed to be consideration for any identified service rendered to Wager Ls .§ individual members by access to the facilities or advantage that is within the SRA si\" wherewithal of the \"club or association\". However, to the extent that it is possible to identify the facilities, advantage or services of the \"club or association\" utilized without further payments specifically attributable to such facility, advantage or service, the subscription will be taxable. [Emphasis Supplied) vi) M/s DLF Recreational Foundation Ltd. vy. CST, New Dethi [2017| Appeal No. ST/1085/2011 (Chandigarh Tribunal) wherein it was held as under: 6. Considering the fact that the levy of service tax on the service provided by a club to its members has been purported ultra-virus under the category of club or association services. Therefore, we do not find any merit in the impugned order, the same is set aside. The appeal is allowed with consequential relief, if any. On reading of the above judgements, it can be observed that various Courts and Tribunals have held that in case the club is for the benefit for the members, club and members cannot be considered as different persons for the purpose of levy of tax. Accordingly, no tax should be levied on the amount collected by club from its members. The ratio of the above judgements should be applied to the applicant's case also. 14, Under Service Tax regime, Courts in several cases held that in absence of deeming fiction, treating club/association & its members as distinct person, service tax shall not be payable. In order to nullify the said decisions, w.e.f. 01.06.2012 clause (a) to Explanation 3 to Sec. 65B provided that an unincorporated association or body of persons, as the case may be and a member thereof shall be treated as distinct persons. However, such deeming fiction is not provided under the current GST regime. In view of the above submissions, it is evident that the Applicant and its members are same. Hence, the key condition to tax a transaction u/s. 7(1)(a), that supplier and recipient must be different, is not satisfied. Considering the same, the transaction of providing services by an association to its members should not be taxed u/s. 7(1)(a). 15. The applicant has submitted Declaration for receipt of Funds and its utilization. This declaration is made in reference to the Application made by the Applicant before Maharashtra Authority for Advance Ruling to seek clarification on, whether GST is payable on the membership fees collected by the Applicant from its Members. In this The Applicant is an association of persons, joined together to undertake social ities without any profit motive. The applicant is not formed to provide services to daw i . . . 7 ‘py ymémbers but people gather under the umbrella with objective to perform socially relevant ‘ Aotivities, er . . . we 2. The Applicant collects funds from each of its Members as decided from time to time. 3. Such funds are pooled together to be expended for making payment of Rotary International dues, Rotary District Dues, meeting expenses, administrative expenses and Charitable activities. 4. The Members of the Applicant are not entitled to any facilities whatsoever such as sports, fitness, lifestyle, entertainment and personal transportation out of these funds. Sy In case of training programs/workshops/cultural programs conducted by the Applicant for the benefits of the Members, the amount towards the said programs/workshops are collected and separately from the Members and accounted accordingly. We undertake to make payment of GST on the same provided the same is above the threshold limit as prescribed by the Govt. 04. 05. 06. 6. The Applicant hereby confirms that membership fees collected from the Members is towards Rotary International / district dues, meeting expenses, administrative expenses and charitable activities. CONTENTION - AS PER THE CONCERNED OFFICER The jurisdictional office has not made any submissions. HEARING Preliminary hearing in the matter was held on 19.09.2019, Sh. Ganesh Narayan, C.A. of T R Chadda & Co LLP appeared and made written submissions and also requested for admission of their application. He further requested for conducting the final hearing simultaneously. The application was admitted and also taken up for final hearing. Jurisdictional Officer Sh. Mahesh Bagwe, State Tax Officer(C-140), Nodal 9, Mumbai, appeared. The applicant’s representative has submitted a copy of M/s. Lion Club of Poona, Kothrud passed by Appellate Authority of Advance Ruling, Maharashtra State, Mumbai dated 14.08.2019, wherein they have hold that membership fee collected by the Club will not be subject to GST and only registration fee charged from members for participation in training programs/workshops will be subject to GST. OBSERVATIONS We have gone through the facts of the case, documents on record and submissions made by both, the applicant as well as the jurisdictional office. Applicant has stated that they receive fees from their members to meet their diture on meetings and communication, RI per capita dues, subscription fees to the ‘Gtarian or Rotary regional magazine, district per capita dues, club annual dues, and any Jother Rotary or district per capita assessment. They hold Programs, Seminars and Institutes “fot Leadership Development and other forums and these programs are only for their A vembers and, non-members, are not allowed to take part. They have also submitted as under: - a. The members of the applicant club come together only for social cause and there is no furtherance of any business of benefits or facilities to the members. b. The applicant and its members are the same because of principle of mutuality and they cannot be regarded as related persons and therefore the transaction between them association and their members will not be covered within the scope of supply ws. 7 of the CGST Act, 2017. Ce Their receipts comprised of Annual Membership Fees, Entrance Fees from New Members, Contribution from Members and Bank Interest. d. The above receipts are utilised for paying Meeting and Communication expenses, Rotary International per capita dues, Subscription fees to the Rotarian or Rotary oe Zack > ininistrative expenses only and not appropriated towards provision of leadership fs Paige regional magazine District per capita dues, Club annual dues and any other Rotary or district per capita assessment. e The facts of the subject case are similar to the facts of the case in Lions Club of Poona Kothrud, wherein the Appellate Authority for Advance Ruling, Maharashtra has held has that fees collected from members cannot be brought within purview of GST. In similar cases of Rotary Club of Queens Necklace and Rotary Club of Nariman Point, this authority has already held that the amount collected as membership subscription and admission fees from members is liable to GST as supply of services. We also find that, vide Amended Order No. MAH/AAAR/SS-RJ/32A/2018-19 dated 14.08.2019 (order issued after the orders passed by this authority in the cases of Rotary Club of Queens Necklace and Rotary Club of Nariman Point), the Hon’ble Appellate Authority For Advance Ruling, Maharashtra, in the case of Lions Club of Kothrud, has held that the membership fee collected by them will not be subject to GST and only registration fee charged from members for participation in the training programs/workshops will be subject to GST. The amended order was issued taking into consideration, the additional submissions made by the Lions Club of Kothrud stating that membership fee recovered by them from their members is spent towards meeting various pede, However, in the subject case, the applicant has not stated that the membership ‘ee has been used only for administrative purposes only. Further, from the Income & Expenditure statement submitted by the applicant for the period F.Y. 2017 -2018, it is seen that while their receipts from members for Events is only Rs.4,35,000/-, they have icurred expenses towards items other than administrative fees including an expenditure of Rs. 32,65,642/- towards Club Events. The receipts from membership fees is Rs. 70,95,760/-. We therefore find that they have used contributions received against membership fees, for expenses other than only administrative expenses. We are therefore of the opinion, keeping the amended decision of the Appellate Authority in mind that, only membership fee recovered by them from their members, spent towards incurring various administrative expenses only will be exempted from GST. With regard to the expenses other than the administrative expenses, this Authority has already held in similar cases of Rotary Club of Queens Necklace and Rotary Club of Nariman Point that the amount collected by the Rotary clubs are towards convenience of members and pooled together for paying various expenses and are leviable to GST. We do not find any grounds to deviate from the said decisions made by this Authority since in the 12 facts of the subject case are very much similar to the facts of the case of Rotary Club of Queens Necklace and Rotary Club of Nariman Point. 07. In view of the extensive deliberations as held hereinabove, we pass an order as follows: ORDER (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA- 09/2019-20/B- j os” Mumbai, dt. 4 . 0 22 9 For reasons as discussed in the body of the order, the questions are answered thus — Question: - The amount collected by Rotary club is towards convenience of members and pooled together for paying meeting expenses, communication expenses, RI per capita dues, subscription fees to the Rotarian or Rotary regional magazine, district per capita assessment and the same is deposited in single bank account. As there is no furtherance of business in this activity and neither any services are rendered nor are any goods being traded, whether the above transaction can be considered as supply of goods or services to its Members under GST? Answer :- The said transaction by the applicant to its members is a supply of goods/services and =a — ee ee B. TIMOTHY A. A. CHAHURE (MEMBER) (MEMBER) CERTIFIED TRUE Copy Copy to:- 1. The applicant 2. The concerned Central / State officer 3. The Commissioner of State Tax, Maharashtra State, Mumbai Bow 4. The Chief Commissioner of Central Tax, Churchgate, Mumbai MEMBER 5, Joint commissioner of State Tax , Mahavikas for Website. o ADVANCE RULING AUTHORITY MAHARASHTRA STATE, MUMBA} Note :- An Appeal against this advance ruling order shall be made before The Maharashtra Appellate Authority for Advance Ruling for Goods and Services Tax, 15\" floor, Air India building, Nariman Point, Mumbai — 400021. "