Kerala HC strikes down GST on services by clubs to members, calls it unconstitutional
Kochi, Apr 12, 2025
Kerala high court declares as void provisions to levy GST on supply of services by a club or association to its members
Kerala high court has declared the amended provisions of the Central Goods and Services Tax (CGST) Act, 2017, and the corresponding provisions of the Kerala Goods and Services Tax (KGST) Act, which enabled the levy of GST on the supply of services by a club or association to its members, unconstitutional and void.
A bench of Justices A K Jayasankaran Nambiar and S Eswaran passed the judgment while considering appeals filed by the Kerala state branch of the Indian Medical Association (IMA) and the GST authorities. The appeals arose from a single bench judgment in a writ petition filed by the IMA.
The IMA challenged the constitutional validity of Section 2(17)(e) and Section 7(1) (aa) of the CGST Act and their counterparts in the KGST Act. These provisions were introduced through the Finance Act, 2021, with retrospective effect from July 1, 2017, to bring within the tax net transactions between clubs or associations and their members. The single bench had upheld the validity of the provisions but struck down their retrospective application. Aggrieved, both parties filed appeals — the IMA against the provisions themselves and the GST authorities against the striking down of retrospectivity.
The division bench examined the scope of Article 246A of the Constitution, which enables the Union and states to simultaneously legislate on goods and services tax. The court observed that the Constitution uses the term ‘supply' in its ordinary sense and does not permit an extended or artificial meaning like ‘deemed supply'. The amendment attempted to redefine ‘supply' to include any transaction between a non-individual entity and its members for consideration without deeming it a ‘service', thereby altering the nature of the taxable event.
The court also relied on the Supreme Court's judgment in the Calcutta Club case, which upheld the principle of mutuality even after the 46th constitutional amendment. It held that unless the Constitution is amended to remove mutuality from the concept of supply or service, such amendments cannot stand. Accordingly, the court declared the impugned provisions as lacking constitutional authority and struck them down.
[The Times of India]
