IMA v. Union of India: Mutuality Survives GST

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Parliament tried to end the mutuality debate by definition — inserting a deeming provision with retrospective effect to 1 July 2017. The Kerala High Court held that a definition cannot do what only a constitutional amendment could.

"Provisions of section 2(17)(e) and section 7(1)(aa) and Explanation thereto of CGST Act, 2017/ KGST Act as amended are to be declared as unconstitutional and void being ultra vires provisions of article 246A read with article 366(12A) and article 265 of Constitution of India." — Indian Medical Association v. Union of India, [(2025) 141 GSTR 522 (Kerala)], W.A. Nos. 1487 and 1659 of 2024 and 468 of 2025, Kerala High Court.

The facts

The assessee was the Kerala State Branch of the Indian Medical Association, running "multiple mutual welfare schemes (e.g., Social Security Schemes, Professional Disability Support Scheme, Professional Protection, Health & Pension Schemes) funded solely through member contributions."

"Members contributed admission/annual fees and, for certain schemes, a 'fraternity contribution' on the death/disability of a fellow member; the pooled sum is paid out to the widow of deceased doctors, disabled doctors, doctors afflicted with specified diseases, etc."

And the schemes were kept genuinely separate: "Each scheme had separate bank accounts and audited accounts. Each Scheme was run by a separately elected committee, in which the Secretary and President of the Assessee were ex officio members."

The demand: the Directorate General of GST Intelligence issued notices "seeking recovery of ₹2.91 crore GST (plus interest & penalty), alleging services provided to member-doctors were taxable 'supply'."

What was actually challenged

"The Assessee contested the constitutionality and retrospective application of Section 7(1)(aa) of the CGST Act, 2017 introduced by the Finance Act, 2021 with effect from 01.07.2017."

Three questions:

• whether the retrospective amendments "which deemed mutual transactions between associations and members as taxable supplies are constitutionally valid";
• whether they "infringe Articles 246A, 366(12A), and 265";
• whether "the doctrine of Mutuality is applicable amidst GST law amendments."

The two arguments

For the assessee. "the underlying basis for the non-taxability of such services was the concept that when a club/association provides services to its members there is no separate recipient of the services and that the services were effectively provided by the members of the club/association to themselves."

"Section 7(1)(aa) artificially deemed a club and its members to be distinct persons, which is beyond legislative competence unless supported by a Constitutional amendment."

And on retrospectivity — that giving the amendment effect from 01.07.2017 was "contrary to principles of natural justice" and "undermines fairness and exceeds legislative competence."

For the Revenue. "Article 246A provides plenary power to Parliament and State Legislatures to define 'supply' and to tax any such supply"; that "mutuality doctrine is inapplicable post-GST and Calcutta Club case was under pre-GST regime"; that retrospective provisions are permissible "if they aimed to correct legal anomalies, prevent tax evasion, or reinforce legislative intent"; and that "Presumption of constitutionality is stronger in fiscal statutes."

What the Court held

"Declared Sections 2(17)(e), 7(1)(aa) and explanation thereto (CGST & KGST) as unconstitutional and ultra vires Articles 246A, 366(12A), and 265 of the Constitution."

"Held that mutuality doctrine continues to shield member-only schemes from GST — even after the statutory amendments."

"Recognized that genuine mutual benefit schemes — funded, administered, audited solely via member contributions — cannot be treated as taxable supplies."

"Parliament's attempt to tax such supplies via retrospective deeming is constitutionally limited without a specific constitutional amendment."

The reasoning turns on a definitional limit, not a policy preference. Article 366(12A) defines "goods and services tax" as a tax on the supply of goods or services, and Article 246A confers power to tax that. If a transaction is not a supply because there is no second person, the argument runs, a statutory deeming clause does not create the constitutional subject matter — it only asserts it.

Why the reasoning matters beyond the IMA

"The principle holds that transactions between an association & its members cannot constitute a 'supply' for the purposes of GST, as there is no distinct 'supplier' and 'recipient' — a person cannot trade with themselves."

"The ruling benefits a wide range of clubs, associations, RWAs, professional bodies collecting member-only contributions for welfare services."

And a separate, freestanding observation on retrospectivity: "The High Court emphasized that retroactive taxation without forewarning breaches the Rule of Law, especially where businesses could not anticipate, collect, or pass on such tax to consumers."

That point survives independently of the mutuality holding. Even where a levy is otherwise valid, a retrospective one denies the taxpayer the only mechanism an indirect tax has — collecting it from the customer at the time of supply.

Two practical cautions. This is a High Court decision striking down a central provision, so its operation outside Kerala, and its fate on any appeal, are open questions. And the shield is for genuine mutuality — separate accounts, separately elected committees, member-only funding — not for an association that also supplies non-members. Confirm the current status before relying on it.

Key takeaways

• The Kerala High Court declared sections 2(17)(e) and 7(1)(aa) and the Explanation unconstitutional and ultra vires Articles 246A, 366(12A) and 265.
• The provisions were inserted by the Finance Act, 2021 with retrospective effect from 01.07.2017.
• The doctrine of mutuality survives the amendment — a person cannot trade with themselves.
• Genuine mutual schemes — separate bank accounts, separate audited accounts, separately elected committees, member-only funding — are outside GST.
• The demand at stake was ₹2.91 crore raised by DGGI on member welfare schemes.
• Parliament's power under Article 246A does not extend to deeming a non-supply into a supply without a constitutional amendment.
• Retroactive indirect taxation was separately criticised, because the tax could not have been collected or passed on.
• The ruling has read-across to clubs, associations, RWAs and professional bodies.

Read next

• ITC and the Wrong GSTIN on a Supplier's Invoice
• Section 16(4) and the Retrospective Section 16(5)
• Section 61 Scrutiny Limits and Improper Notice on the GST Portal

Disclaimer: Positions stated as on 5 September 2026, based on Indian Medical Association v. Union of India [(2025) 141 GSTR 522 (Kerala)], sections 2(17)(e) and 7(1)(aa) of the CGST Act, 2017 and Articles 246A, 265 and 366(12A) of the Constitution, as summarised in the ICAI compilation Significant Judicial and Advance Rulings in GST (Second Edition, February 2026). A High Court ruling on a central provision may be under appeal; verify its current status before relying on it.