The Supreme Court issued a notice on July 25 regarding the Union Government’s petition that contests the recent judgment from the Kerala High Court. This judgment found the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act), which permitted the imposition of GST on supplies made by clubs and associations to their members, to be unconstitutional. The Court has ordered that no recovery actions should be taken against the Indian Medical Association (IMA), which is the respondent in this case.
The bench, consisting of Justice PS Narasimha and Justice AS Chandurkar, heard the matter with Additional Solicitor General N Venkataraman representing the Union. Senior Advocate Arvind Datar, who represented the IMA, requested that there be no retroactive recovery, a request the Court accepted. The Kerala High Court’s ruling was in response to a writ appeal filed by the IMA regarding the GST charges levied on services provided by the Association to its members. The IMA argued based on the principle of mutuality, asserting that services rendered by clubs or associations to their members should not be taxable.
An amendment to the provisions of Section 2(17)(e) and Section 7(1)(aa) of both the CGST and the Kerala Goods and Services Tax Act, 2017 (KGST Act) had previously removed this non-taxability. These amendments introduced provisions that rendered the services provided by a Club or Association to its members taxable for tax levy purposes. The amendments, enacted through the Finance Act, 2021, were made retroactive from July 1, 2017. The IMA challenged the constitutionality of these specific provisions.
The High Court bench, which included Justice Dr. Jayasankaran Nambiar and Justice S. Easwaran, ruled the amendments unconstitutional, stating they violated the definition of “supply” as outlined in Article 246A of the Constitution. Hence, the provisions in question from both the CGST and KGST Acts were declared unconstitutional and void, as they were found to be ultra vires to Articles 246A, 366 (12A), and 265 of the Constitution of India. Additionally, the bench noted that applying these provisions retroactively was unlawful, emphasizing that changing the basis of taxation retroactively, when taxpayers had not expected such levies, countered the principles of fairness and the rule of law.
Case Details: UNION OF INDIA Vs INDIAN MEDICAL ASSOCIATION | SLP(C) No. 18349-18350/2025
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