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Applicability of GST on Clubs, Association or Society Services
Let us explore whether it’s applicable or Not on the principle of mutuality .
- Activities of clubs or association are regarded as business.
As per clause (a) of sub-section (1) of section 7, supply includes 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.
The term business is defined under clause (17) of section 2 of the Act, according to clause (e) of which, business includes 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.
- Classification of services and rate of tax
Accommodation, food and beverage services are classifiable under the Heading 9963. For rate of tax applicable to these services, refer to S.No. 7 of the Table appended to the Chapter Rate of Tax on Services supra.
3. Exemption i.r.o. declared tariff up Rs. 1000
As per S.No. 14 of Notification No. 12/2017-Central Tax (Rate), dt. 28-6-2017, services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent, are chargeable to Nil rate.
The meaning and scope of the declared tariff is discussed in the chapter title Renting of Rooms in Hotel, Guest House, Inn, etc. infra.
- Exemption i.r.o. services as trade union
As per clause (a) of S.No. 77 of Notification No. 12/2017-Central Tax (Rate), dt. 28-6-2017, services by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution as a trade union, are exempt from levy of tax.
As per clause (zzn) of para 2 of the said Notification, trade union has the meaning as assigned to it in clause (h) of section 2 of the Trade Unions Act, 1926.
Trade Unions provides services by way of negotiating the employers for increment in pay, providing the welfare facilities, compensation, etc. Members of trade union contribute their share to the trade union for such services provided by them.
- Exemption i.r.o. services by way of reimbursement of charges or share of contribution
As per clause (b) of S.No. 77 of Notification No. 12/2017-Central Tax (Rate), dt. 28-6-2017, services by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution, for the provision of carrying out any activity which are exempt from the levy of Goods and service Tax, are exempt from levy of tax.
- Exemption i.r.o. services by Resident Welfare Associations to its members
As per clause (c) of S.No. 77 of Notification No. 12/2017-Central Tax (Rate), dt. 28-6-2017, services by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution up to an amount of Rs. 5000 (Rs. 7500, w.e.f. 25-1-2018) per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex, are exempt from levy of tax.
The CBEC vide Press Release on Services Provided by RWA (Resident Welfare Association)/Housing Society has clarified that if the aggregate turnover of such RWA is upto Rs. 20 Lakh in a financial year, then such supplies would be exempted from GST even if charges per member are more than Rs. five thousand.
RWA shall be required to pay GST on monthly subscription/contribution charged from its members if such subscription is more than Rs. 5,000 per member and the annual turnover of RWA by way of supplying of services and goods is also Rs. 20 lakhs or more. Under GST, the tax burden on RWAs will be lower for the reason that they would now be entitled to ITC in respect of taxes paid by them on capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes, other sanitary/ hardware fillings etc.) and input services such as repair and maintenance services.
- Exemption i.r.o. services provided by NPOs engaged in welfare of labour or farmers
As per S. No. 77A of Notification No. 12/2017-Central Tax (Rate), dt. 28-6-2017, as inserted w.e.f. 27-7-2018 services provided by an unincorporated body or a non-profit entity registered under any law for the time being in force, engaged in,
(i) activities relating to the welfare of industrial or agricultural labour or farmers; or
(ii) promotion of trade, commerce, industry, agriculture, art, science, literature, culture, sports, education, social welfare, charitable activities and protection of environment,
to its own members against consideration in the form of membership fee upto an amount of one thousand rupees (Rs. 1000) per member per year, are exempt from levy of tax.
- Place of provision
Clubs or associations services are not specified under any of sub-sections (3) to (14) of section 12 of the IGST Act, 2017. Hence, the place of supply of such service would be determined as per sub-section (2) thereof, according to which, the place of supply of a taxable service made to a registered person shall be the location of such person. The place of supply of such services made to an un-registered person shall be,
(i) the location of the recipient where the address on record exists; and
(ii) The location of the supplier of services, in other cases.
- Input tax credit in respect of membership of club
(i) Position effective upto 31-1-2019
As per section 17(5)(b)(ii) of the Act, as it existed upto 31-1-2019, input tax credit was not allowable in respect of supply of service by way of membership of club, health and fitness centre.
(ii) Position effective from 1-2-2019
With effect from 1-2-2019, section 17(5)(b)(ii) provides that input tax credit in respect of membership of a club is allowable only when it is obligatory for an employer to provide the same to its employees under any law for the time being in force.