GST on club services to members is ultra vires the constitutional provisions; affirms principle of mutuality and holds retroactive tax from 1 July 2017 as illegal – Kerala High Court

In brief

In a recent judgement¹ , the Kerala High Court ruled in favour of the taxpayer (medical association). It declared that sections 2(17)(e) and 7(1)(aa) of the Central Goods and Services Tax Act, 2017 (CGST Act), and the Kerala Goods and Services Tax Act, 2017 (KGST Act) are unconstitutional and void as these are ultra vires the provisions of Article 246A read with Articles 366 (12A) and 265 of the Constitution of India. These provisions, which aim to tax services provided by associations to their members, are found to violate the principle of mutuality and exceed the legislative competence of both the Parliament and state legislatures. The court also deemed the retroactive application of these provisions from 1 July 2017 as illegal.