Kerala HC issues notice on Kerala High Court Advocates’ Association plea against GST on goods, services provided to members

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The Kerala High Court recently issued notice on a plea moved by the Kerala High Court Advocates’ Association challenging the Goods and Services Tax (GST) levied on the goods and services provided by it to its own members.


Single judge Justice Bechu Kurian Thomas opined that the petitioners have made out a prima facie case, which merits admission.

The Court issued the order on a petition filed by the KHCAA contending that it is not liable to pay tax under the Kerala State Gods and Services Tax Act, 2017 (KSGST) and the Central Goods and Services Tax Act, 2017 (CGST) for goods and services provided by it to its own members.

Advocate Firoz KM appeared for the petitioners in the matter.

The primary contention of KHCAA was that such levy of GST would attract the ‘doctrine of mutuality’ as there could be no supply of goods from it to its members.

According to the petitioners, if two or more persons are not there, there can be no supply which would be eligible to tax.

In the case of KHCAA, it was contended that two persons as contemplated by law are not involved and hence, GST cannot be levied against it

In such cases, there is no “supply of goods or services” within the meaning of Article 366(12A) of the Constitution of India for the purpose of levy of “goods and services tax”

Reliance was placed on the Constitution Bench judgment of the Supreme Court in CTO v. Young Men’s India Association, to argue that a club or association of persons, even though a distinct legal entity, is only acting as an agent for its members in the matter of supply and hence no tax is leviable.

Even after the 46th amendment introduced Article 366(29A) which defines ‘tax on sale or purchase of goods’ and contemplates ‘tax on supply of goods’, the Supreme Court, in State of West Bengal v. Calcutta Club Ltd, held that doctrine of mutuality continues to be applicable to both incorporated and unincorporated Member’s Associations, the plea pointed out.

The plea also claimed that inclusion of facilities or benefits to members of associations within the ambit of the term ‘business’ as defined in Section 2(17)(e) of the CGST and KSGST Act will not cast any liability on the association to pay tax for supply to its members.

Moreover, the recent proposed amendment of the CGST Act by introducing Section 7(1)(aa), seems to be to circumvent the decisions of the Supreme Court in Calcutta Club and Young Men’s India Association cases, the plea said.

The said amendment, if notified, affects the mutuality principle and therefore, according to the petitioner, will be unconstitutional, without legislative competence and violative of Articles 246, 248, 265 etc.

The same is alleged to be true of similar proposed amendments to the KSGST Act as well.

In this regard, the petitioners sought a declaration from the Court affirming the same to be unconstitutional.

The KHCAA submitted that it had constructed a building which has a canteen and an organic shop for its members and a few banks run by outside agencies on license basis.

While it believes that the income derived from the same is not liable to be taxed under the Acts as it is used for the members, by way of abundant caution, it started collecting SGST and CGST from the occupants and is willing to remit the same as long as it does not prejudice the valid claims of the petitioners in the instant case, the plea said.

The petitioners submitted that they apprehend steps for penalty, assessment proceedings and illegal demand of tax from the respondents.

Since the pandemic situation prevented them from filing annual returns since March 2021, the department has issued notice to the petitioners without granting them an opportunity of personal hearing. Therefore, they requested that they be allowed to file returns without paying taxes on the transactions covered by mutuality principles.

The Court opined that the petitioners raised a prima facie case for consideration and ordered that the petitioners shall be free to file the returns contemplated under the CGST and KSCGST Acts in accordance with law, subject to the contentions raised in the present writ petition.

The Court also clarified that the proceedings, if any, initiated pursuant to the notices issued to KHCAA, will be subject to the result of the writ petition and the further orders from the Court

Read Order here:

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