Principle of Mutuality prevails over sec. 7(1)(aa) - Indian Medical Association case - Kerala High Court

Dispute involved : GST levy on activities of association with members - are admission fees, membership fee and other similar fees collected by Indian Medical association from its members liable to GST?

We are ONE not two persons

Hon'ble High Court (Kerala) quashes sec. 7(1)(aa) and below are important observations of the Court :

• Placing reliance on Ranchi Club vs Chief Commissioner of Central excise & Service Tax (2012) (SC) and Calcuttta Club case (2019) (SC), Hon'ble court observes that scheme of GST under the constitution contemplates the existence of at-least 2 persons - a provider and recipient before one can infer either a "supply" or "service" for the purposes of levy.

  
  

• Concept of self-supply or self-service are not envisioned under the Constitution.

  
  

• Court observes that Article 246A uses the word "supply" without giving it an artificial meaning that would include a "deemed supply". It is observed that when a word/concept in the Constitution has been interpreted by the Supreme Court in a particular manner, a legislative body, that derives its legislative competence to enact a Statute from the Constitution, cannot give to the word/concept a meaning that goes against the meaning assigned to the same word/concept by the Supreme Court in the context of its setting under the Constitution.

  
  

• Court further observes that even after the amendment to CGST/SGST Acts, there is no "deemed service" in circumstances where service is rendered by a club/association to its members since the definition of 'service' has not been amended.

  
  

• Court observes that concepts of 'supply' and 'service' required atleast two persons for inferring its existence. Since the principle of mutuality survives 46th amendment to the Constitution and since the Constitution has not been amended suitably to remove the concept of mutuality from the concepts of supply and service, the amendment to CGST/SGST Acts will fail the test of constitutionality.

  
  

• Court held that sec. 2(17)(e), sec. 7(1)(aa) and explanation thereto of CGST/SGST Acts as unconstitutional and void being ultra-vires provisions of A.246A, A 366(12A) and A.265 of the Constitution.

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