CLUBS AND ASSOCIATIONS

Date of Introduction: 16.06.2005 vide Notification NO.15/2005 dated 07.06.2005

Definitions:

“club or association” means any person or body of persons providing services, facilities or advantages, for a subscription or any other amount, to its members, but does not include—

(i) any body established or constituted by or under any law for the time being in force; or

(ii) any person or body of persons engaged in the activities of trade unions, promotion of agriculture, horticulture or animal husbandry; or

(iii) any person or body of persons engaged in any activity having objectives which are in the nature of public service and are of a charitable, religious or political nature; or

(iv) any person or body of persons associated with press or media;  (section 65(25a))

“taxable service” means any service provided or to be provided to its members, by any club or association in relation to provision of services, facilities or advantages for a subscription or any other amount; (section 65(105)(zzze))

Value of Taxable Service:

The value of taxable service shall be the gross amount charged by the service provider for providing such service and the money value of any other consideration ( if any) received for providing such service. The value of taxable service shall be determined as per the provisions made under section 67 of the Finance Act, read with Service Tax (Determination of Value ) Rules, 2006

Who is responsible to pay Service Tax:

The service provider is responsible to pay service tax. However, in cases, where the provider of taxable service is located outside India and the recipient of service is located in India, the recipient of service is responsible for payment of service tax. The responsibility to pay service tax under such situations is determined by the provisions made under section 66A of the Finance Act, 1994, read with Taxation of Services (Provided from outside India and received in India) Rules, 2006

Scope of Service:

Any service provided or to be provided to its members by any club or association in relation to provision of services, facilities, or advantages for a subscription or any other amount is taxable under sub-clause (zzze) of section 65(105) of the Finance Act, 1994. “Club or association” has been defined under clause (25a) of section 65 of the Finance Act, 1994.

Various clubs or associations provide services, facilities or advantages to their members for a subscription or a charge. This taxable service covers within its ambit the charges recovered by such clubs or associations for membership and providing various services. However, exclusions have been made in respect of specific clubs or associations which will not be covered within the ambit of clubs or associations for the purpose of levy of service tax.

These exclusions cover any body established or constituted by or under any law, trade unions, clubs or association formed for promotion of agriculture, horticulture or animal husbandry, clubs or association which are non profit making bodies and are engaged in any activity which are in the nature of public service and are of a charitable, religious or political nature, clubs or associations associated with press or media.

Legally, bodies which are established or constituted “under a statute” are different from bodies which are “formed and registered” under a statute.

Companies and Societies registered under the respective Acts are merely bodies “formed and registered” under these Acts and cannot be treated as “established or constituted” under these Acts. Therefore companies or societies would fall outside the scope of clause (25 a)(i) of Section 65 of Finance Act. In other words, any body formed and registered as a company or society which provides services, facilities or advantages for a subscription or any other amount to its members is liable to pay service tax under section 65(25a) of the Finance Act, 1994.

Taxable services are defined as services provided to members by clubs or associations in relation to provision of services, facilities or advantages for a subscription or any other amount. Facilities or advantages are provided to members in return for a subscription or other consideration. The scope of the term any other amount is the amount paid by members, apart from membership fee or recurring subscription fee, such as amounts paid for provisions of services to the guests of a member, amount paid for get-togethers and functions charged over and above the subscription amount. This will also be liable to service tax. However, amount charged by club to its members for sale of items such as food or beverages would not be taxable provided the documents evidencing such sale are available.

     Any additional fee should be treated in the same way as subscription. Life membership fees must be treated in the same way as subscription. In certain professions, persons cannot practice unless they are registered with a statutory body and have paid fees which are prescribed by law. In such cases, the organization is not providing any service in the course of its business and it is merely carrying statutory functions. Since no service is provided, the question of levy of service tax does not arise. However, if there is no statutory requirement, service tax is liable to be paid.

(Ref: Board’s Circular No. F.No.B1/ 6 /2005-TRU dated 27.07.2005)

General Exemptions:

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