Supreme Court Issues Notice To IMA On Union's Plea Against HC Judgment Quashing Provision To Levy GST On Supplies By Clubs To Members

The Supreme Court today(July 25) issued notice on the Union Government's petition challenging the recent Kerala High Court judgment striking down the provisions of the Central Goods and Services Tax Act, 2017 ("CSGT Act"), which allowed the levy of GST on supply by clubs and associations to their members.

However, the Court ordered that there shall not be any recovery steps against the Indian Medical Association, the respondent in the matter.

A bench comprising Justice PS Narasimha and Justice AS Chandurkar passed the order. Additional Solicitor General N Venkataraman appeared for the Union. Senior Advocate Arvind Datar, for the IMA, requested that there be no recovery for the past period, which the Court accepted.

The Kerala High Court's judgment was delivered in a writ appeal filed by the Indian Medical Association against the recovery of GST on the services given by the Association to its members. The IMA invoked the principle of mutuality to argue that the services rendered by a club or an association to its members are not taxable. The non-taxability of services to members was 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 and the Kerala Goods and Services Tax Act, 2017 ("KGST Act").

The amendments introduced deeming provisions, making the supply of services by a Club/Association to its members a taxable supply for the purposes of the levy of tax. The amendment that was introduced through the Finance Act, 2021, was also made retroactive with effect from July 1, 2017. The IMA, therefore, challenged the constitutionality of these provisions.

The High Court bench comprising Justice Dr Jayasankaran Nambiar and Justice S Easwaran has declared these provisions to be unconstitutional. The bench reasoned that the provision went against the definition of "supply" given under Article 246A of the Constitution.

"Accordingly the provisions of Section 2(17)(e) and Section 7(1)(aa) and the Explanation thereto of the CGST Act, 2017 and the provisions of Section 2(17)(e) and Section 7(1)(aa) and the Explanation thereto of the KGST Act are declared as unconstitutional and void being ultra vires the provisions of Article 246A read with Article 366 (12A) and Article 265 of the Constitution of India," the bench declared.

The bench also opined that giving of retrospective effect to the provisions was also illegal. The bench observed that altering the basis of taxation with retrospective effect, when parties have not anticipated such a levy for the past period, is against 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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