1. GST on Club Services – Section 7(1)(aa) Declared Ultra Vires
The Court struck down the legislative amendment (Section 7(1)(aa) and Section 2(17) (e) of CGST/KGST Acts) introduced to tax services provided by clubs and associations to their members. It ruled that these provisions are ultra vires the Constitution.
“We do… find that the statutory provisions impugned in these proceedings suffer from a definitive lack of legislative competence… [They] are declared as unconstitutional and void being ultra vires”
2. A Constitutional Term Cannot Be Statutorily Rewritten
The Court made a clear constitutional distinction — when a term is used in the Constitution and has been judicially interpreted, its meaning cannot be changed or expanded by a mere statutory amendment.
“We are of the view that when a word/concept in the Constitution has been interpreted by the Supreme Court in a particular manner, a legislative body… cannot give to the word/concept a meaning that goes against the meaning assigned… in the context of its setting under the Constitution.”
3-Legislature Cannot Override Constitutional Understanding of 'Supply '
The Court clarified that the concept of ' supply ' under Article 366(12A) involves a transaction between two persons, and that club-member transactions do not satisfy that test. Expanding it by statute is impermissible.
“A phrase as understood under the Constitution cannot be statutorily expanded… since the power to legislate is itself one that is conferred by the Constitution.”
4- Mutuality Principle Still Holds Ground in Constitutional Tax Interpretation
Relying on Calcutta Club and related cases, the Court held that the principle of mutuality remains valid even post the 101st Amendment and cannot be overridden by ordinary legislation.
“The principle of mutuality has survived… and the amendment militates against the constitutional understanding of the term [supply].”
5-Retrospective Application of Tax Also Struck Down
The Court separately noted that even if the amendment were to be upheld, its retrospective effect from 01.07.2017 would still be unconstitutional, citing violation of fairness and Rule of Law.
“We do not find any… justification for the retrospective operation… It militates against the concept of Rule of Law.”
Case: Indian Medical Association v. Union of India
Citation-2025 TAXONATION 688 (KERALA)
CA Shafaly Girdharwal
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