Supreme Court Exempted RWAs, Clubs and Housing Societies From GST [FAKE NEWS]

A viral message circulating across social media and WhatsApp groups claiming that the Supreme Court has completely exempted Resident Welfare Associations (RWAs), cooperative housing societies, clubs, and associations from Goods and Services Tax (GST) has been found to be misleading and legally incorrect.

The message alleges that the Supreme Court has struck down Section 7(1)(aa) of the Central Goods and Services Tax (CGST) Act, restored the principle of mutuality in its entirety, and ruled that no GST is payable on maintenance charges or member contributions collected by clubs, RWAs, and cooperative housing societies. It further claims that past GST payments may now be eligible for refunds.

However, legal experts and available court records indicate that no such Supreme Court judgment has been delivered.

What the Viral Message Claims

The widely circulated post asserts that:

GST is not applicable on maintenance charges collected by RWAs and housing societies.
The constitutional principle of mutuality has been fully restored.
Section 7(1)(aa) of the CGST Act has been struck down.
Clubs and societies can seek refunds of GST paid in the past.
Only services rendered to non-members remain taxable.

These claims have generated considerable excitement among housing societies and club managements across the country.

Reality: Section 7(1)(aa) Remains in Force

Contrary to the viral message, Section 7(1)(aa) of the CGST Act continues to remain part of the law.

The provision was introduced through the Finance Act, 2021 with retrospective effect from July 1, 2017, specifically to overcome judicial precedents based on the doctrine of mutuality. It deems activities or transactions between a club, association, society, or body of persons and its members as a “supply” for GST purposes.

As a result, transactions between clubs or associations and their members are expressly brought within the GST framework.

There is no reported Supreme Court judgment striking down this provision.

Background: Mutuality vs GST

Before GST, the doctrine of mutuality had been recognized by courts, including the Supreme Court, in cases involving sales tax and service tax. The principle is based on the idea that a person cannot make a profit from himself, and therefore an organization and its members are treated as the same entity.

In the landmark service tax case concerning clubs and associations, the Supreme Court had accepted the mutuality principle and held that service tax could not be levied on transactions between clubs and their members.

However, Parliament subsequently amended the GST law through Section 7(1)(aa) to specifically deem such transactions as taxable supplies, thereby seeking to neutralize the impact of earlier judicial rulings.

No Supreme Court Ruling Striking Down GST on RWAs

A review of recent Supreme Court judgments reveals no decision declaring Section 7(1)(aa) unconstitutional or invalid.

Tax professionals point out that while various petitions challenging the provision may be pending before courts, there has been no final Supreme Court verdict granting a blanket GST exemption to RWAs, housing societies, clubs, or associations.

Consequently, GST liability continues to be governed by the existing statutory framework.

Current Position for RWAs and Housing Societies

Under current GST law:

RWAs and cooperative housing societies may be required to pay GST on maintenance charges collected from members if the prescribed thresholds are crossed.
Exemptions and threshold benefits continue to apply as provided under GST notifications.
Transactions with non-members remain taxable.
No general refund entitlement has arisen from any Supreme Court ruling.

Experts Urge Caution

Tax experts have advised RWAs, housing societies, and clubs not to stop charging or paying GST based solely on viral social media messages.

Any decision to discontinue GST compliance could expose organizations to future tax demands, interest, and penalties if the law remains unchanged.

Conclusion

The viral claim that the Supreme Court has struck down Section 7(1)(aa) of the CGST Act and completely exempted RWAs, cooperative housing societies, clubs, and associations from GST is false. No such Supreme Court judgment currently exists, and the statutory provision deeming transactions between associations and their members as taxable supplies remains in force.

Until an actual court ruling or legislative amendment changes the legal position, RWAs, housing societies, and clubs must continue to comply with GST requirements as prescribed under existing law.