Recently, Kerala High Court in the case of Indian Medical Association vs. UOI & Ors. has declared section 7(1)(aa) of CGST Act as unconstitutional held that no GST is payable on services provided by clubs/associations to their members.
The experts believe that retrospective amendments in tax laws, particularly under GST, have created significant uncertainty and financial strain, often overriding judicial decisions and raising concerns about fairness. A key example is the retrospective insertion of Section 7(1)(aa) to deem transactions between clubs and their members as taxable supplies, countering the long-standing doctrine of “mutuality of interest.” The Kerala High Court, in its 2025 Division Bench ruling, held this amendment unconstitutional, asserting that only a constitutional amendment—not mere legislative change—can override such foundational principles. It also ruled that retrospective tax liabilities are impermissible, opening the door for clubs to seek refunds on GST previously paid.
As per the article by Advocate G Natarajan in TIOL, “ONE disturbing phenomenon in tax legislations is the Damocles sword of retrospective amendments. Any law is an experiment and tax laws are no exception. Any drafting error or omission found in the taxing statute, either observed during its implementation or identified by the courts, can always be corrected and there is no quarrel about the rights of the Parliament / State Legislature to do such course corrections, prospectively. But, when such corrections are done at a later date, with retrospective effect, it creates lot of uncertainty in the matter of taxation, unplanned outgo on account of taxes leaving a dent on profits earned and sometimes, the additional demand on account of retrospective amendments may well be more than the earnings.”
Advocate Naresh Gupta while expressing his opinion stated, “it’s an highly debatable question as to the interpretation of the Constitution as to whether the legislature under its powers of eminent domain can levy tax on a particular class of persons under the deeming fiction; or not, like deeming fiction created in section 7(1)(aa) of the GST law ? Moreover, we must not forget that section 7(1)(aa) of the GST law, inter-alia, uses word ‘ consideration ‘ and it’s Explanation uses phraseology “…. supply of activites or transactions inter se …..”. As such, in my humble view, a big question arises as to whether the intention of the legislature in crafting deeming fiction under section 7(1)(aa) was to levy tax on all type of societies, irrespective of their avowed objects enshrined in their particular constitutions (By-Laws) more particularly where members instead of getting supply of any activity, only give contributions absolutely for the welfare of general public at large or may be for a particular section of community etc etc. I think, the complexity involved in issue more particularly after the judgement of Kerala HC declaring it ultra virus, would indeed be needed to be settled by the Hon’ble Apex Court in the context of GST regime.”
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