The Federal Tribunal (Customs, Sales Tax and Excise) has declared sales tax (ST) on club membership illegal and said the sales tax is unpayable on the amount received by the club including entrance fee, annual subscriptions, etc.
The term "services provided" used in schedule cannot in any matter include membership fee of monthly subscription as the same has no nexus with the services which a club provided to its members like providing boarding, lodging, arranging parties, supplying foods and other stuff.
Petitioner Counsel Muhammad Azhar said the membership received by the club were of capital nature and in lieu of no taxable had been provided by the club. He said the Punjab Sales Tax Ordinance was an invalid law being ultra vires to the Constitution.
"The Ordinance is an incomplete, improper and vague law and is incapable to being applied and therefore invalid and it is not possible to operate them for creating the intended tax in any tangible and legal form," he added.
The ordinance was promulgated by the governor of Punjab under the assumption that power to enact this law was available to him under the residuary legislative list which assumption is not correct because this law conflicts with the constitutional power of the National Assembly and is being violative of Article 141 of the Constitution.