The Maharashtra Bench of the Authority for Advance Ruling (AAR), consisting of members Rajiv Magoo and T.R. Ramnani, has ruled that the membership fee and annual subscription fee collected by a Club from its members is exigible to GST under the Central Goods and Service Tax (CGST) Act and the State Goods and Service Tax (SGST) Act.

The Applicant Poona Club Ltd had filed an application before the Maharashtra Bench of the Authority for Advance Ruling, seeking an advance ruling as to whether the membership fee, annual subscription fee and annual games fee collected by it from its members was liable to tax under the Central Goods and Service Tax (CGST) Act or the State Goods and Service Tax (SGST) Act. 

The Applicant Poona Club had submitted before the AAR that the membership fee, annual subscription fee and annual games fee collected by it from its members was not liable to tax under the CGST/SGST Act. The Applicant had averred that since the initial contribution, i.e., the membership fee was not a supply of either goods or any service, the same was not liable for levy of GST. Also, the Applicant had contended that as per its Memorandum of Association, the main object of the club was to promote sports and encourage social interaction between its members. It had contended that there was no profit motive involved in the present case since the fee was collected by the club for meeting administrative and maintenance expenses and for provision of facilities to its members. The Applicant Poona Club had also submitted before the AAR that despite the provisions contained in Section 2(17)(e) of CGST Act, 2017, the activities under taken by the club could not be called 'business' since the main object of the club was not of a commercial nature, and since the fees received from its members was spent back on its members it did not qualify as a 'supply' under the CGST Act.

The Applicant had also contended that since the word 'supply' and 'services' under the CGST Act required two persons, there could be no supply or service by one person to himself. The Applicant had submitted that since the club and its members had the same identity, the principle of mutuality would apply, leading to the conclusion that there could not have been any business or supply between the Club and its members so as to be exigible to tax under the GST laws. 

Section 2(17)(e) of the CGST Act provides that the term 'business' under CGST Act would include the provision of facilities or benefits by a club, association or society to its members for a subscription or any other consideration.

The AAR observed that the Finance Act, 2021 had inserted Section 7(1)(aa) to the CGST Act, which was brought into force on 1^st January, 2022 with effect from 1^st July, 2017. The AAR observed that as per the Explanation to Section 7(1)(aa), a person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to have taken place from one such person to another. The AAR observed that in view of the amendment to Section 7 of CGST Act, the Applicant Club and its members were distinct persons and the fees received by the Applicant Club was a consideration for the supply of goods or services as a separate entity. The AAR therefore held that the Applicant had to pay GST on the amount received by its members and that the principle of mutuality had no application after this amendment.

Also, the AAR had observed that Section 2(17)(e) of the CGST Act is a specific clause made for associations, clubs and societies. The AAR ruled that the given provision did not talk about the necessity of attributing any profit motive to a club or a society for its activities to be considered as 'business'.

The AAR therefore ruled that the membership fee, annual subscription fee and the annual games fee collected by the Applicant Poona Club from its members was liable to tax under the CGST/SGST Act.