Kerala High Court Quashes Retrospective GST on Club-Member Supply [Read Judgement]:

Kerala High Court quashes retrospective GST on club-member services before January 2022, upholding the principle of fairness and legislative limits.

Kerala HC Strikes Down Retrospective GST on Club Services Before 2022

CA Pratibha Goyal

Apr 17, 2025

Last update on Apr 17, 2025

Kerala High Court Quashes Retrospective GST on Club-Member Supply [Read Judgement] Facts of the Case

The Kerala State Branch of the Indian Medical Association (IMA) filed a writ petition fearing coercive recovery actions by GST authorities concerning services provided under various mutual benefit schemes. The IMA claimed these were non-taxable based on the principle of mutuality.
The IMA runs multiple schemes: Social Security, Disability Support, Professional and Hospital Protection, Kerala Health, Pension, Mutual Benefit, and Patient Care, funded through contributions from member doctors.
The Finance Act, 2021, introduced amendments in the CGST and SGST Acts, deeming services provided by clubs/associations to members as taxable, retroactive from 1 July 2017.

Issues Framed

Whether the amendment to the GST laws through the Finance Act, 2021, violates the principle of mutuality.
Whether such a statutory amendment can override constitutional provisions or judicial precedents.
Whether retrospective application of Section 7(1)(aa) of the CGST Act is valid.
Whether the amendment violates Articles 14, 19(1)(g), 265, and 300A of the Constitution.

Petitioner’s Arguments

Asserted the principle of mutuality shields them from GST on services to members.
Cited precedents, including the Calcutta Club and YMIA cases, affirm the non-taxability of club-to-member transactions.
Argued that deeming provisions under Section 7(1)(aa) were unconstitutional, beyond the legislative power under Article 246A.
Contended that retrospective tax liability imposed unanticipated and unmanageable burdens, violating fundamental rights.

Respondent’s Arguments

Defended the legislative competence under Article 246A and stated the amendment was to nullify judicial interpretations.
Argued that GST laws had a broad legislative scope with no express restrictions, permitting such definitions.
Emphasised the presumption of constitutionality and legislative power to override judicial precedents via statutory amendments.
Asserted that Section 7(1)(aa) was within legal authority and its retrospective application was valid.

Court’s Decision & Rationale

The Division Bench upheld the constitutional validity of the amendments made through the Finance Act, 2021, including Section 7(1)(aa) of the CGST Act.
It concurred that the principle of mutuality had been legislatively overridden and recognised the legislative authority under Article 246A.
However, the court invalidated the retrospective application of the provision to the period before 1 January 2022, citing the principles of fairness and non-confiscatory legislative action.

The court declared the retrospective application of Section 7(1)(aa) from 1 July 2017 to 31 December 2021 as unconstitutional. Section 7(1)(aa) remains valid and enforceable only from 1 January 2022.

About Author

CA Pratibha Goyal

Co Founder

CA Pratibha Goyal is Chartered Accountant qualified in 2016, is a Member of The Institute of Chartered Accountants of India having wide experience in the field of Auditing, Taxation, ROC, GST and Secretarial matters etc. She has written over a thousand articles & has made several videos on topics related to Auditing & Taxation. As a Speaker she has delivered various sessions on various branches of NIRC of ICAI.