The Rajasthan Appellate Authority for Advance Ruling ( AAAR ) directed the Authority for Advance Ruling ( AAR ) to pronounce rulings after considering the contentions of the appellant.
M/S Umed Club, Gaushala Ground, the appellant are engaged in providing various services such as short-term accommodation, restaurant, and recreational services. They are interalia registered under the Rajasthan Society Registration Act and are incorporated clubs. The appellant sought an Advance Ruling as to whether the services such as short-term accommodation, restaurant and recreational services provided by them to its members are taxable.
The Authority for Advance Ruling, Rajasthan concluded that the service provided by the club to its members is taxable as per clause (aa) of sub-Section (l) of Section 7 of the CGST Act, 2017 w.e.f. July 1, 2017, and pronounced that GST is payable on the services provided by clubs to its members.
According to the Appellant, two persons are necessary for an activity to be termed as service. Moreover, according to Explanation 3(a) to the definition of service, “an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons”. It was concluded by the Supreme Court that incorporated clubs or associations (under the Companies Act/Cooperative Society Act) were not included in the service tax net for this mentioned period. The service tax was payable only by unincorporated clubs. It was held that from 2005 onwards, the Finance Act does not purport to levy service tax on incorporated clubs.
The appellant submitted that the retrospective amendment as proposed by the Finance Act, 2021 was not operational till the date of Advance Ruling and so the said proposed amendment could not have been made a basis to rule that GST is payable on the services provided by the club to its members.
The Advance Ruling has held that the retrospective amendment has been made vide Finance Act 2021 by adding a new clause (aa) after clause (a) in section 7(1) of CGST Act 2017 wherein the scope of the supply was widened.
The Advance Ruling has been passed on 27.09.2021 on basis of an amendment which was not operational as on the date of pronouncing Ruling. Such a Ruling is not sustainable and deserves to be quashed.
The appellant sought Advance Ruling to ascertain whether or not the services of short-term accommodation, restaurant and recreational services provided by them to its members are taxable. The Authority for Advance Ruling, Rajasthan in their Order dated 27.09.2021 held that as per clause (aa) of sub-Section (l) of Section 7 of the CGST Act, 2017 w.e.f. July l, 2017 the services provided by the club to its members are taxable and GST IS payable on it.
The AAAR comprising of Sh. Mahendra Ranga, Member (Central Tax) and Dr. Ravi Kumar Surpur, Member (State Tax) observed that though the said amendment was retrospective, however, it was not passed by all state assemblies as well as it was not operational till the date when the Ruling was pronounced. The amendment was brought into force vide Notification No. 39/2021 — Central Tax dated 21.12.2021 w.e.f. 1.1.2022.
The Advance Ruling has been pronounced on 27.09.2021 based on an amendment which was not operational as on the date of pronouncing Ruling. The appellant avers that such a Ruling is not sustainable and deserves to be quashed.
The AAAR set aside the Ruling of the AAR, Rajasthan and remanded the matter back to AAR to decide the application de-novo after considering all the contentions of the appellant.
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