GST leviable on Contribution made by RBI and Public Sector Banks to NIBM [Read Order]

The Authority for Advance Ruling (AAR), Maharashtra has held that GST can be levied on the contribution to the National Institute of Bank Management ( NIBM ) by the member banks like the Reserve Bank of India and the Public Sector Banks.

Before the authority, the National Institute of Bank Management has contended that the Reserve Bank of India, State Bank of India and other public sector banks in the capacity of promoters of the institute contribute annually an amount of Rs. 100 lakh as a subscription towards recurring expenses. The entire CAPEX is also contributed at actuals by RBI, SBI, and other public sector banks in ratio of RBI 40%, SBI 20%, and other public sector banks 40%.

The authority overruled the applicant’s contention that their activity would be covered under the ‘Principal of Mutuality’ i.e. “No man can trade with himself; he cannot make, in what is its true sense or meaning, taxable profit by dealing with himself”. This assumption is made by the applicant considering that they and the various Public Sector banks and RBI are one and the same.

The authority found that as per the definition of “person” under the GST Act, 2017, there are two persons namely, the applicant and the other person being the members of the applicant i.e the Public Sector Banks, Hence the club and member are distinct entities.

“The GST law has given very wide connotation for services, which will cover any activity other than which involves goods, money and securities. Therefore the activities of the applicant mentioned above can clearly be considered as service being provided by the respondents to its members.”

“Any contributions collected/received by the applicant will definitely be understood as ‘consideration as the same has been paid for supply of services. The applicant has fulfilled both the conditions prescribed by Section 7 of the GST Act; firstly that such supply is made by them in lieu of consideration i.e contribution and secondly, such supply has been made in the course or furtherance of business since the term business includes provision by club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members,” it said.