FICCI, CII, ASSOCHAM and several trade associations liable to Service Tax as club or association?
Yes! According to the Hyderabad Chief Commissioner. He clarified this in a recent RAC meeting. FAPCCI – Federation of Andhra Pradesh Chambers of Commerce and Industry - the apex body for traders and industries in Andhra Pradesh is a Service Tax assessee in Hyderabad. FAPCCI guides and advises the industry and trade but FAPCCI itself was in doubt whether they were liable to pay Service Tax and they asked this question in the RAC meeting. The Chief Commissioner clarified that
FAPCCI, vide letter dated 18.10.2005 claimed that their association does not fall under the category of clubs and association as they are rendering service of a nature of charity and are not formed with a profit motive. They enclosed opinions obtained from certain experts.
FAPCCI in an association registered under Companies Act with an objective to promote commerce, art, service etc., and the profits, if any, is applied for promoting the said objectives.
The Association is not the association established or constituted under a statute and hence not excluded from the clause 25(a) of Section 65 of the Finance Act under club or association services. This club is also not one of the natures formed for promotion of agriculture, horticulture or animal husbandry or any association described in CBEC circular F.No. Bl/6/2005-TRU dated 27.07.2005 for exclusion from levy of service tax. It is evident that the profit earned is used for promotion of its objectives. They are providing services, facilities or advantages for a consideration/subscription and hence the amount is taxable under sub-clause (zzzc) of Section 65(105) of the Act. The objective of Service Tax is to tax the gross amount charges less deductions permitted under Section 67, if any. It is not bothered about profit or loss in the service.
In reply to a query it was also clarified that the service tax is payable on the subscription fee paid by the members of the association whether or not they have availed the services of the association.
This clarification makes not only FAPCCI liable to pay Service Tax but also other trade organisations like local chambers of commerce, export promotion associations etc under the category of clubs or associations.
It is learnt that the big three FICCI, CII and ASSOCHAM are not paying Service Tax.
As per the Act, “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;
Will not FAPCCI, FICCI etc, come under Category (iii) above? Under the Income Tax Act, are they not considered as charitable organisations?
DDT spoke to a former President of FAPCCI (who is himself a leading tax analyst) and he was of the firm opinion that FAPCCI was not liable to pay Service Tax but they were paying it because, being a reputed public organisation, they did not want to be charged with evading taxes and attracting penal consequences. He said a holistic approach has to be taken and the tax was meant to be on commercial clubs and not public bodies like FAPCCI.
Surprisingly the DGST has not yet given any clarification on this issue. Does the Hyderabad Chief Commissioner’s decision have All India effect or will it be that the AP Chamber is liable to pay Service Tax and the Karnataka Chamber is not? The Board should clarify at least for the sake of uniformity.