(Indian Medical Association, Kerala State Branch v. Union of India & Others, Judgment dated 11 April 2025)
In a judgment that has captured the attention of industries, professional bodies, clubs, RWAs, and tax practitioners across the country, the Kerala High Court has delivered a game-changing decision on the applicability of GST to transactions between associations and their own members. This ruling not only resolves a long-pending controversy but also reinstates the fundamental principle of mutuality, which has guided tax jurisprudence for decades.
The dispute arose from the Finance Act 2021, which introduced amendments to the GST law aimed at taxing member contributions such as subscription fees, maintenance charges, and other payments made by members to their association. The amendments, especially the introduction of Section 7(1) (aa) and the expansion of Section 2(17)(e) attempted to create a legal fiction by declaring associations and their members as distinct persons, thereby treating mutual transactions as taxable supplies. What made the situation even more challenging for taxpayers was the retrospective application of these provisions from 01 July 2017, exposing associations to a sudden and significant tax burden.
The Indian Medical Association (IMA) challenged these provisions on constitutional grounds, and the Kerala High Court’s ruling has now validated those concerns. The Court emphatically held that the relationship between an association and its members is rooted in the doctrine of mutuality, a principle that recognizes that members and their association are, in reality, one and the same entity. Since a person cannot supply goods or services to himself, the Court concluded that no taxable supply arises in transactions limited to members and their own association. This finding strikes at the very foundation of the 2021 amendments.
What makes this judgment especially noteworthy is that the Court went beyond technical GST interpretation and examined the constitutional authority of Parliament to enforce such a levy. It held that a statutory amendment cannot override a constitutional principle. If the intention was to treat associations and members as separate persons, such a fundamental shift could only be achieved by amending the Constitution, not by introducing a deeming fiction in ordinary legislation. The Court also criticized the retrospective application of tax, calling it excessive, unreasonable, and violative of Article 14, as it unfairly penalized taxpayers for past periods governed by a different legal understanding.
As a result, the High Court declared the 2021 amendments unconstitutional, ultra vires, and void, effectively removing the legal basis for imposing GST on mutual transactions. This has offered immense relief to clubs, cooperative housing societies, trade associations, NGOs, and other member-based organizations that were facing or anticipating substantial GST demands.
This judgment also presents a timely opportunity for associations to revisit their GST positions and strengthen their compliance strategy. At a broader level, the decision reinforces a vital constitutional principle: taxation must operate within the boundaries of the Constitution, and statutory enactments cannot override foundational doctrines through legal fiction.
As the GST regime continues to evolve, this development marks a significant milestone in GST jurisprudence. It serves not only as a shield for taxpayers but also as a strong reminder that constitutional doctrines remain central to the framework of indirect taxation in India. Although the Union Government has filed an appeal before the Supreme Court, it is important to note that no stay has been granted on the Kerala High Court’s judgment. The matter is currently pending adjudication before the Hon’ble Supreme Court in SLP (C) Nos. 18349–18350 of 2025.
