GST not applicable on subscription fees

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The Karnataka Advance Ruling Authority (AAR) has ruled that GST is not applicable on subscription fees collected from club members.

The Applicant, Bowring Institute is a club and non-profit organization established by the. British in 1868 as a literary and scientific society. It is a membership club as opposed to an owner club. Members contribute in the form of membership dues and infrastructure development funds which are used for the provision of services and goods and a reading room, library, rooms to accommodate family and guests, a bar and sports facilities. In addition to the membership fee upon admission of the member to the Applicant, an admission fee as an infrastructure development fund is levied.

In addition, the applicant subcontracts catering services which provide food and drink and operate a supermarket at the applicant’s premises. These facilities are only available to members. These outsourced agencies charge GST on their supplies of food, beverages and the sale of goods to members. The applicant bears the cost of these goods and services out of the subscription fees paid by the members.

The applicant requested the advance ruling on whether the amount collected as a subscription fee paid by the applicant’s members in respect of the facilities provided by the applicant is subject to the provision of services under the GST.

Yet another issue raised was whether the amount collected as infrastructure development funds for the development and maintenance of facilities provided by the applicant is subject to GST as a supply of services.

The coram of Dr MPRavi Prasad and Mashood Ur Rehman Farooqui observe that the 2021 finance law has annulled what the courts have ruled so far and has countered the principle of mutuality by means of an explanation which stipulates that members or constituents of the club and the club are two separate entities and persons for the purposes of article 7 of the CGST law, 2017 which defines supply.

The Authority noted that under article 1 of the 2021 finance law, the amendment made to article 7 of the CGST law of 2017 through article 108 of the 2021 finance law no. ‘will enter into force only on the date on which the Central Government notifies the same and then the same will be notified with the corresponding modifications adopted by the respective States and Union Territories in the respective SGST / UTGST Law.

The AAR ruled that unless the amended section 7 of the CGST Act, 2017 is notified, the applicant is not required to pay GST on subscription fees and the development fund of infrastructure collected from members in accordance with the judgment of the Supreme Court in the case of M / s. Calcutta Club Ltd.

Therefore, the applicant is not liable for GST on subscription fees and infrastructure development funds collected from members and this decision is subject to amendment of the CGST law by article 1 of the law 2021, as and when it is notified.

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