One Entity, One Soul: Unravelling the GST Puzzle around Clubs and Associations
Ashwarya Sharma, Advocate, Co-Founder & Legal Head, RB LawCorp
Section 7(1)(aa) of the CGST Act deems services between clubs and their members as taxable “supply.” The Kerala High Court, in Indian Medical Association v. UOI, struck this down as unconstitutional, reviving the debate on the doctrine of mutuality.
Key Points:
- Doctrine of Mutuality: A club and its members are legally the same; one cannot transact with oneself. This principle, upheld by the Supreme Court (e.g., Calcutta Club), contradicts the GST deeming fiction.
- Constitutional Flaw: GST laws require two distinct persons for a “supply.” Section 7(1)(aa) violates this by taxing self-service.
- Retrospective Taxation: Making the provision effective from July 2017 was held unfair and disruptive.
Conclusion:
The ruling safeguards constitutional interpretation over legislative overreach. Mutual transactions within clubs cannot be taxed unless the Constitution is amended to redefine “supply.”
You can read the full article here :
(The author is a practicing advocate, Co-Founder and Legal Head of RB LawCorp.
He specializes in GST law. Suggestions or queries can be directed to
ashsharma@rblawcorp.in. The views expressed in this article are strictly
personal.)
