On April 11, 2025, the Kerala High Court declared Section 7(1)(aa) of the Central Goods and Services Tax (CGST) Act, 2017, unconstitutional. This provision had extended the definition of “supply” to include transactions between clubs or associations and their members, thereby subjecting such transactions to GST. The court’s ruling effectively exempts services provided by clubs and associations to their own members from GST liability .
The judgment reinforces the principle of mutuality, which posits that an entity cannot engage in a transaction with itself. This principle was previously upheld by the Supreme Court in the Calcutta Club case, where it was determined that services provided by clubs to their members were not taxable under GST due to the mutuality doctrine. The Kerala High Court’s decision aligns with this precedent, emphasizing that the relationship between a club and its members does not constitute a taxable supply .
This ruling has significant implications for clubs and associations across India, potentially leading to a reevaluation of GST liabilities for member-related services. However, it’s important to note that the decision may be subject to appeal, and further legal developments could influence its application nationwide.
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