Service Tax on Club or Associations

Question : What is the meaning  of Clubs or Associations?

Answer : Clubs or Associations are established in different forms of organisations i.e. they can be society under the Society Registration Act, or a trust or as a company under section 25 of the Companies Act, 1956. The clubs or associations provide different types of facilities/services like sports facilities, restaurant facility, banquet hall facility, accommodation facility, organising various tournaments, etc

As per clause (a) of Explanation 2 to section 65B(44) of the Finance Act, 1994 "an unincorporated association or a body of persons and its members shall be treated as distinct person."Therefore, services provided by unincorporated body or entity registered as a society to its members will be considered as a service provided from one person to another

Question:-  Is service provided by a club or an association a service?  

Answer : As per section 65B(44) of the Finance Act, 1994 'Service' means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include—

(a)			An activity which constitutes merely,—
(i)		A transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or
(ii)		A transaction in money or actionable claim.

The definition of service given in section 65B(44) of the Finance Act, 1994 is very wide to cover services by clubs or associations. Thereby any service rendered by a club or an association would be chargeable to service tax, as it represents an activity which is done for a consideration.

Question : Is there any Exemption to Club or Association?

Answer As per Mega Exemption Notification - Notification No. 25/2012, dated 20-6-2012 provides various types of services which are exempt from the liability of payment of service tax.

Item No. 28 of Notification No. 25/12-ST, dated 20-6-2012 grants exemption to an unincorporated body or an entity registered as a society providing services to its own members subject to conditions specified therein and reads as follows:

"Service by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution –

(a)		as a trade union;
(b)		for the provision of carrying out any activity which is exempt from the levy of service tax; or
(c)		up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex;" Following are the Conditions for granting the Exemption:- a) The service must be provided to its own members   b) The amount must be received by way of reimbursement charges or as share of contribution M/s. XYZ is registered as a Society and it has a facility of holding functions. A member Mr. Y books a function for his anniversary and pays amount to M/s. XYZ which is not related to reimbursement or share of contribution. Therefore, it will be subject to payment of service tax.  c) The service may be provided by a Trade Union d) The service carrying out any activity which is exempt from service taxM/s. XYZ, registered as society, organizes a healthcare camp. The members contribute towards the holding of camp. As healthcare facilities are exempt from service tax, amount received from members of the society for holding camp will also be exempt e) The amount collected by way of reimbursement or share of contribution must not be more than Rs. 5,000/- per month per member by residential housing societyM/s. XYZ Pvt. Ltd. is rendering the services of a housing society; members of the company paid the amount of Rs. 2,500/- per member. The company is a profit generating entity, so the exemption will not be available to the company and service tax shall be paid on the entire amount paid by members.