AAR Refrains from Answering Key GST Mutuality Doctrine Issue

The Kerala Authority for Advance Ruling (AAR) in Indian Co-Operative Credit Society Limited [Advance Ruling No. KER/02/2026] rejected the advance ruling application filed by the assessee at the threshold on grounds of admissibility under Sections 97(2) and 98(2) of the CGST Act, 2017. A Bench comprising Shri Jomy Jacob, IRS and Shri Mansur M.I. declined to examine the merits of the controversy relating to GST applicability on transactions between the co-operative society and its members.

The applicant, is a Multi-State Co-Operative Credit Society registered under the Multi-State Co-operative Societies Act, 2002, having its head office at Thrissur, Kerala. The society primarily provides credit facilities and financial assistance to its members. It also engages certain members as facilitators for operational activities and shares specific monetary amounts with them. The applicant approached the Authority seeking clarity on whether such amount-sharing arrangements and transactions with members would attract GST under Section 9 of the CGST Act.

The applicant argued that the principle of mutuality governed all transactions between the society and its members and therefore such activities could not be treated as “supply” under Section 7 of the CGST Act. Reliance was placed on the Supreme Court judgment in State of West Bengal v. Calcutta Club Ltd. as well as the Kerala High Court ruling in Indian Medical Association v. Union of India (2025), wherein the retrospective amendment introducing Section 7(1)(aa) was challenged. However, the records also revealed that proceedings relating to similar tax liabilities and penalty disputes were already pending before adjudicating and appellate authorities.

“The Authority observed that the application did not satisfy the statutory admissibility requirements prescribed under Sections 97(2) and 98(2) of the CGST Act, 2017.”

After examining the maintainability of the application, the AAR held that the questions raised by the applicant fell outside the permissible scope of advance ruling jurisdiction. The Bench observed that where disputes on substantially similar issues are already pending under the GST law, the Authority is barred from entertaining the application.

The Authority therefore rejected the application at the threshold without entering into any detailed examination of the substantive legal issues raised by the applicant. It specifically refrained from expressing any view on the doctrine of mutuality, the constitutional validity or applicability of Section 7(1)(aa), or the taxability of transactions between the society and its members. The Court highlighted that:

“Since the application itself was found to be inadmissible, the Authority declined to render any finding on the merits of GST liability or exemptions claimed by the applicant society.”

Thus, the Kerala AAR dismissed the application filed by Indian Co-Operative Credit Society Limited as inadmissible under Sections 97(2) and 98(2) of the CGST Act, 2017, without issuing any ruling on the merits of the dispute.

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