Facts of the case:
- “The national institute of bank management (NIBM), is registered as a society, a premier academic cum training institute was established in 1969 by RBI.
- NIBM 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%.
- This annual contributions of the promoters are for ensuring that NIBM shall not in deficit as regards to its operations.
- NIBM contends that the GST is not applicable on the contributions collected from Public sector banks.
Issue involved: Whether consideration paid as subscription or contribution towards recurring or capital expenses or reimbursement or by whatever name may be called to NIBM by it members (being banks) for its recurring and non-recurring expenses is leviable to GST?
Provisions and Interpretation of the Law:
- The applicant has made assumption that they and the various Public Sector banks and RBI are one and the same.
- However, 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.
- The authority highlighted the definition of “person” as per GST Act, 2017, that there are two persons i.e. the applicant and the other person being the members of the applicant (being banks), Hence the club and member are distinct entities.
- Further, as per definition of service, GST law defines services as 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 shall qualify as “consideration” as the same has been paid for supply of services”.
Hence, by considering all the relevant provisions, The applicant has fulfilled both the conditions prescribed by Section 7 of the GST Act;
1. Supply is made by in lieu of consideration i.e contribution and
- 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.
Conclusion: 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 its member banks like the Reserve Bank of India and the Public Sector Banks.