Clubs, members separate entities; transactions between the two taxable

New Delhi, Feb 15 (IANS) Members of clubs, including sporting bodies and professional institutions will now have to fully comply with tax regulations and pay GST for any goods and service they receive from facilities to which they themselves are members or constituents.

The Finance Ministry has introduced amendments in the Central GST Act through the Finance Bill, 2021 proposing levy of tax on activities or transactions involving supply of goods or services by any person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.

So, members of clubs and other bodies were enjoying tax free services and goods so far.

This is set to change from next financial year once the Finance Bill is passed by Parliament.

Most of the supply may attract 18 per cent GST.

Also, the term person and its members or constituents will be treated as two distinct person and hence, any the activities or transactions between them will be deemed as supply between two separate persons.

The changes have been proposed with retrospective effect from July 1, 2017, the date of initiation of GST in the country.

The changes as included in the Finance Bill, 2021 has resulted in overruling of judgment of Supreme Court in case of Calcutta Sports Club related to service tax era which was based on the doctrine of mutuality which stated that if there are no members there will be no club and vice-versa.

Hence, the decision was that the clubs are not entitled to charge, collect and pay service tax on any services made to members. The Jharkhand High Court also gave similar ruling in case involving Ranchi Club.

(Subhash Narayan can be contacted at subhash.n@ians.in)