If you are a club member then here’s something you should take note of. Associations and club members will have to levy Goods and Services Tax (GST) on fees collected from members retrospectively from July 1, 2017. The Finance Ministry has notified January 1 as the date for implementation of the amended Section 7 of the GST law. This amendment inserted a new clause that says the expression ‘supply’ will also include activities or transactions by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. This new clause comes into effect from July 1, 2017.
Experts say this is likely to run into litigation besides creating accounting logistical issues for these institutions.
What this means is that a club, an association or a society and their members will be treated as two distinct persons. Transactions between these two will be considered taxable. Their stance was bolstered by the Supreme Court ruling in favour of the assessee in the matter of Calcutta Sports Club.
The Jharkhand High Court (in the matter of Ranchi Club) and some Authorities for Advance Ruling (Bowring Institute of Bangalore, etc) gave similar directives.
Experts say, for all similar matters in respect of periods since July 2017, it will now be very difficult to take a plea of mutuality of interests or supply between an association and its members as these would now be treated as taxable supplies for GST purposes.