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CMA Final · Indirect Tax Laws and Practice · Supply under GST

Mahalakshmi Sports Club, a society, supplies coaching and refreshments to its members for a monthly fee. Which statement is correct about the treatment under Section 7(1)(aa) of the CGST Act, 2017?

The activities are a supply. Section 7(1)(aa) treats a non-individual person and its members or constituents as two separate persons, notwithstanding any law or judgment, so services provided to members for cash, deferred payment or other valuable consideration are supplies. Profit motive or company status is irrelevant.

  1. AThe activity is not a supply because a club and its members are one and the same person
  2. BThe activity is not a supply unless the club is a company
  3. CThe activity is a supply only if the club makes a profit
  4. DThe club and its members are deemed to be two separate persons, so the activities for consideration are a supplyCorrect

Explanation

Clause (aa) covers activities or transactions by a person, other than an individual, to its members or constituents for cash, deferred payment or other valuable consideration. Its Explanation deems the person and its members to be separate persons notwithstanding any other law or court judgment. Hence the principle of mutuality is overridden, and profit or company status is irrelevant.

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