No GST on Services Given by Clubs or Associations to Their Members: Retrospective Amendment unconstitutional:

No GST on Services Given by Clubs or Associations to Their Members: Retrospective Amendment unconstitutional The Kerala High Court has ruled that Section 7(1)(aa) of the CGST Act is unconstitutional. This section was introduced to say that any services provided by a club or association to its own members should be treated as a supply and taxed under GST. However, the court disagreed with this and said that a club and its members are not separate; they are basically the same legal entity. So, when a club provides services to its members, it’s not like selling something to an outsider; it’s more like doing something for itself. Because of this, the court decided that no GST should be charged on such services and struck down that part of the law. The bench of Justice A.K. Jayasankaran Nambiar and Justice Easwaran S. has permitted the writ appeal submitted by the Indian Medical Association (IMA) and cancelled the changes made through the Finance Act, 2021, that added Section 7(1)(aa) to the CGST Act. These changes had removed the old legal idea called the principle of mutuality, which means a club and its members are the same and not separate. Earlier, in the Calcutta Club case, the Supreme Court said that services provided by a club to its own members were not taxable under GST. But the new law went against that. The Kerala High Court has now said those changes are not valid, and the old rule still applies, clubs don’t have to pay GST on services given to their own members. In the case of State of West Bengal vs. Calcutta Club Limited, the Supreme Court clearly mentioned that the principle of mutuality still applies even after the 46th Amendment to the Constitution. The Court also confirmed that this principle is not just for unregistered (unincorporated) clubs but also for registered (incorporated) clubs. The Court pointed out that the 61st Law Commission Report, which came before the 46th Amendment, did not fully understand or consider this important point about mutuality. Indian Medical Association, the Complainant runs several mutual Schemes for the advantage of its member-doctors, e.g. Social Security Schemes or SSS (I, II, and III), Professional Disability Support Scheme (PDSS), Professional Protection Scheme, Kerala Health Scheme, etc. He runs all these schemes to help fellow doctors. Among them, one of two schemes also helps their family members immediately. The member-doctors pay an admission or yearly fee to be part of the organisation. In some special schemes (Such as SSS or PDSS), they also contribute a set amount when a fellow member doctor passes away or becomes disabled. This money is collected into a pool and then given to the widow of the deceased doctor, disabled doctors, or doctors suffering from certain serious illnesses. Each of these schemes is managed by its own elected committee. The Secretary and President of the main organisation are automatic (ex-officio) members of these committees. Each scheme has its own separate bank account, and the finances are kept and audited separately.