Decoding of Finance Bill 2021

Decoding of Finance Bill 2021

Amendment in section 7

1. Scope of Supply

w.e.f. 01.07.2017

7) (1) For the purposes of this Act, the expression “supply” includes––

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment, or other valuable consideration.

Explanation.––For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;”.

(b) Import……..

Amendment in schedule II

2. Activities 1 [or transactions] to be treated as supply of goods or supply of services

(7) The following shall be treated as supply of goods, namely:- Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.

Analysis

Impact

• The said retrospective amendment is proposed to safeguard the levy of the tax on the amount collected by clubs, associations, society, or any such bodies from its members or constituents.

• Non-applicability of Doctrine of Mutuality.

Reason

To put end to litigation

Calcutta Club Ltd. [2019]110 taxman 47 SC

• The doctrine of mutuality continues to be applicable to incorporated and unincorporated members club after the 46th Amendment adding article 366(29-A) to the Constitution of India.

• The Young Men’s India Association[1970] 1 SCC 462] (supra) and other judgments that applied this doctrine continue to hold the field even after 46th Amendment.

• Sub-clause (f) of Article 366(29-A) has no application to members clubs.

Article 366(29-A):- (46th Amendment)

tax on the sale or purchase of goods includes:-

(a)…

(e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment, or other valuable consideration;

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