The Supreme Court recently issued notice to the Indian Medical Association (respondent), acting upon the petition challenging the Kerala High Court’s ruling dated April 11, 2025, by Justices A K Jayasankaran Nambiar & Easwaran S., striking down the provisions of the CGST Act 2017, whereby it was held that no GST is payable on services provided by clubs/associations to their members.
The notice came to be issued challenging the striking down of the constitutional validity of the amendments inserting Section-7(aa) of the Finance Act, 2021, that nullified the principle of mutuality that was expounded by the Apex Court in the case of State of West Bengal vs Calcutta Club Limited [2019 (29) GSTL 545 (SC), which effectively made services to members by a club non-taxable.
The Division Bench comprising Justice Pamidighantam Sri Narasimha and Justice Atul S Chandurkar, however, ordered that there shall be no recovery steps against the respondent in the matter. The Bench asked the Department to refrain from the recovery, while referring to its decision of the Larger Bench in the case of State of West Bengal vs Calcutta Club, which emphatically held that the principle of mutuality continued even after the 46th Amendment, and recognised that the law has always been that the principle of mutuality extends even to incorporated clubs and not just to unincorporated clubs.
As per the brief background of the case, the respondent runs various mutual Schemes for the benefit of its member-doctors, to support fellow doctors and their immediate family members, who contribute an admission/annual fee, and the pooled sum is paid out to the widow of deceased doctors, disabled doctors, and doctors afflicted with specified diseases. The respondent bona fide believed that it was not liable to pay GST on services rendered by it to its members under the said Schemes since it was well settled through a line of precedents that the principle of mutuality would insulate services rendered by a Club/Association to its members from the levy of GST on supply of services. The said basis of non-taxability was, however, removed by an amendment of the provisions of Section 2(17)(e) and Section 7(1)(aa) read with the Explanation thereto of the CGST Act, 2017 and the Kerala GST Act, 2017 that introduced deeming provisions making the supply of services by a Club/Association to its members a taxable supply for the levy of tax. The amendment that was introduced through the Finance Act, 2021, was also made retroactive with effect from July 01, 2017, by adding to the financial woes of the respondent.
The Kerala State Branch of the Indian Medical Association, therefore, approached the Kerala High Court apprehending coercive action from the Directorate General of GST Intelligence for recovery of tax on various services rendered by it to its members, and contended that it was not liable to pay tax on the supply of services to its members. Though the High Court held that no GST is payable on services provided by clubs/associations to their members, the matter was not put to rest, and the Government, through its GST Department, knocked on the door of the Apex Court. Acting on the same, the Apex Court issued a notice to the Indian Medical Association.
Appearances:
ASG N. Venkataraman, Senior Advocate Rupesh Kumar, AOR Gurmeet Singh Makker, and Advocates Sarthak Karol, Ishaan Sharma, and Nar Hari Singh, for the Petitioner
Senior Advocate Arvind Datar, AOR E.C. Agarwal, and Advocates Mahesh Agarwal, Rishi Agrawala, Alok Yadav, Renganath, and Siddhi Doshi, for the Respondents
