Is GST Leviable On Services Provided By Association To Its Members? Kerala High Court Issues Notice On KHCAA's Plea

The Kerala High Court has issued notice on a plea moved by the Kerala High Court Advocates' Association challenging the Goods and Services Tax (GST) levied on the goods and services provided by the Association to its own members.

Justice Bechu Kurian Thomas observed while admitting the plea:

"I am satisfied that the petitioners have made out a prima facie case, which merits admission."

The Court issued the order on a petition filed by the KHCAA contending that it is not liable to pay tax under the Kerala State Goods and Services Tax Act, 2017 (KSGST) and the Central Goods and Services Tax Act, 2017 (CGST) for goods and services provided by it to its own members.

Advocate Firoz K.M appeared for the petitioners in the matter.

KHCAA is engaged in charitable activities and the Income Tax Department has issued Registration under Section 12AA of the Income Tax Act, in favour of the Association. It is thus exempt from payment of income tax.

As per the plea, the Association has been acting as an agent for its members in the matter of distribution of various essential items to its members and for providing various essential facilities to its members.

The primary contention of KHCAA was that a levy of GST for providing facilities to its own members would attract the 'doctrine of mutuality' as there could be no supply of goods from the Association to its members.

"The expression "supply" used in the Constitution of India contemplates two persons. Supply has to be from one person to another. If two or more persons are not there, there can be no supply, which would be exigible to tax. In the case of a members' Association, like the first petitioner, two persons as contemplated by law are not involved. Hence Goods and Service Tax cannot be levied against the first petitioner in the case of distribution of various articles and goods to its own members or for providing facilities to its own members. There is no supply in such cases, as one person cannot supply goods or services to himself or itself," the plea reads.

The Association accordingly sought an interim direction to the respondents to accept all pending and future returns of the first petitioner under the Central Goods and Services Tax Act, 2017 and Kerala State Goods and Services Tax Act, 2017 since March 2021 provisionally without insisting on conceding tax liability on the distribution of various articles and goods to its own members or for providing facilities to its own members pending disposal of the petition. 

The Court opined that the petitioners raised a prima facie case for consideration and ordered that the petitioners shall be free to file the returns contemplated under the CGST and KSCGST Acts in accordance with law, subject to the contentions raised in the present writ petition.

However, it clarified:

"The interim relief sought for by the petitioners is too wide and the same will have the tendency to interdict or control the procedure that the Assessing Officer must adopt. It is not for this Court to control the Assessing Officer that too at the present stage."

The Court nevertheless agreed that the proceedings, if any, initiated pursuant to the notices issued to KHCAA, will be subject to the result of the writ petition and the further orders from the Court.

Case Title: Kerala High Court Advocates' Association & Anr v. Assistant Commissioner, SGST Department & Ors.

Click Here To Read The Interim Order