The Kerala High Court held that the provisions of Section 7(aa) of the Central Goods and Service Tax Act, 2017 (CGST Act) will have prospective operation with effect from 01.01.2022

 

Indian Medical Association Vs Union Of India (Kerala High Court)

Case Summary:

  • The Indian Medical Association (IMA) Kerala branch challenged the constitutionality of Section 7(aa) of the CGST Act, arguing that it violated the principle of mutuality and retrospectively imposed a tax burden on the association.
  • The IMA Kerala branch operates various schemes for its members, including social security, professional disability, and professional protection. These schemes involve contributions from members and payouts to members or their families in case of death, disability, or other events.
  • The IMA Kerala branch argued that these activities were not subject to GST under the principle of mutuality, as they involved members serving themselves rather than one another.
  • The court acknowledged the established principle of mutuality but found that Parliament, in its wisdom, had amended the CGST Act to include activities between clubs or associations and their members within the scope of GST.
  • The court held that the amendment was not unconstitutional as it did not violate any fundamental rights or exceed the legislative competence of Parliament. However, the court did not find it appropriate to apply the amendment retroactively.
  • The court ruled that the provisions of Section 7(aa) would have prospective operation with effect from January 1, 2022, the date the amendment was notified.
  • The court also stated that the assessing authority should examine each activity undertaken by the IMA Kerala branch independently to determine whether it involves the supply of goods and services subject to GST.

Key Points:

  • The court acknowledged the principle of mutuality in taxation, which states that activities between members of a club or association where members serve themselves rather than one another are not subject to GST.
  • The court found that Parliament amended the CGST Act to include activities between clubs or associations and their members within the scope of GST.
  • The court held that the amendment was within the legislative competence of Parliament and did not violate any fundamental rights.
  • The court ruled that the amendment should not be applied retroactively and would take effect from January 1, 2022.
  • The court stated that the assessing authority should examine each activity undertaken by the IMA Kerala branch independently to determine whether it involves the supply of goods and services subject to GST.

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