GST Dispute: Supreme Court issues notice to IMA
New Delhi: The Supreme Court recently issued notice to the Indian Medical Association (IMA), on a plea by the Central Government challenging the recent order by the Kerala High Court, which had earlier striked down the provisions of the Central Goods and Services Tax Act, 2017, which allowed the levy of GST on supply by clubs and associations to their members.
However, the Apex Court bench comprising Justices PS Narasimha and AS Chandurkar has ordered that there shall not be any recovery steps against IMA.
The Apex Court bench issued this direction after taking note of the prayer made by the Senior Advocate Arvind Datar, counsel for IMA, who requested that there be no recovery for the past period.
Medical Dialogues had earlier reported that the association had moved to the High Court bench in 2023 seeking an order restraining the GST Intelligence officials, their men, and agents from provisionally attaching the properties of the association.
IMA filed the plea after the DGGI sent an email to the IMA Secretary and requested a comprehensive list of immovable properties registered under the IMA Kerala branch. Previously, the GST Intel officials had issued a notice to IMA on June 19 requiring compliance with the GST laws.
However, IMA had contended before the Court that they did not need to pay the GST as it was registered as a "charitable association". On the other hand, the GST intel claimed that 90% of the activities carried out by the IMA are categorized as non-charitable.
Last year, an HC bench of Justice Dinesh Kumar Singh had dismissed the Kerala IMA's plea and clarified that the association was liable to pay GST on the supply of goods and services to its members.
Also Read: IMA Kerala Liable to Pay GST on Supply of Goods and Services to its Members: HC
However, IMA challenged the order before a Division bench of the HC. The Association 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.
Under the amendments, deeming provisions were introduced, 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 was introduced through the Finance Act, 2021, and it was made retroactive with effect from July 1, 2017. IMA challenged the constitutionality of these provisions.
As per the latest media report by Live Law, while considering the matter, the HC bench comprising Justice Dr Jayasankaran Nambiar and Justice S Easwaran declared that these provisions were unconstitutional. It was observed by the Division bench of the HC 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 had declared.
Further, the Kerala HC Division bench had also opined that it was illegal to give retrospective effect to the provisions. The bench had observed that altering the basis of taxation with retrospective effect, when parties have not anticipated such a levy for the past period, was against fairness and the rule of law.
Challenging the HC order, the Union Government has now approached the Supreme Court, which has issued notice to the respondents, including IMA.
To view the order, click on the link below:
https://medicaldialogues.in/pdf_upload/union-vs-ima--296483.pdf
Also Read: IMA not a Charitable Organization, but Corporate Entity: GST sleuths tell high court
