GST not applicable on amount collected as membership subscription fees on account of Principle of Mutuality

THE AUTHORITY FOR ADVANCE RULINGS IN KARNATAKA

The Relevant Text of the Order as follows :

8. We observe that Finance Act, 2021 has over-ruled what the Courts have held till now and has countered the Principle of Mutuality by way of Explanation which states that the members or constituents of the club and the club are two separate entities and persons for the purpose of Section 7 of CGST Act, 2017 which defines Supply.

9. We also note that by virtue of Section 1 of Finance Act, 2021, the amendment brought in Section 7 of CGST Act, 2017 by way of Section 108 of Finance Act, 2021, will only come into effect on the date when Central Govt notifies the same and then the same will be notified with the corresponding amendments passed by the respective States and Union territories in respective SGST / UTGST Act.

10. Therefore, we conclude that unless the amended Section 7 of CGST Act, 2017 is notified, the applicant is not liable to pay GST on subscription fees and Infrastructure development fund collected from the members as per the Hon’ble Supreme Court judgment in the case of M/s. Calcutta Club Ltd.

11. In view of the foregoing, we pass the following

The Question and Ruling as follows:

1. Whether amount collected as membership subscription fees paid by the members of the applicant towards facilities provided by the applicant is liable as the supply of service under GST?

2. Whether amount collected as an infrastructure development fund for the development and maintenance of the facilities provided by the applicant is liable as the supply of service under GST?

RULING

The applicant is not liable to pay GST on subscription fees and Infrastructure development funds collected from the members and this ruling is subject to the amendment to the CGST Act by section 1 of the Finance Act 2021, as and when it is notified.