The Goods and Services Tax (GST) Intelligence, after conducting a series of investigations since November 2022, has demanded the Indian Medical Association (IMA) of Kerala to pay the GST liability. The officials stated that the activities of the association are non-charitable.
According to IMA, there is no need to pay GST liability as the association was registered as a “charitable association”. Also, they were under the genuine belief that their activities do not fall under the purview of GST.
As per the GST intelligence, 90% of the activities carried out by the IMA are categorized as non-charitable. Additionally, the Central Goods and Services Tax (CGST) Act, 2017, specifically classified the IMA’s activities as business-related, thereby making them subject to GST. Also, the IMA runs liquor bars, insurance and contract apartments for its members.
The officials from the Directorate General of Goods and Services Tax Intelligence (DGGI) have asserted that the insurance scheme implemented by the IMA lacks the mandatory approval from the Insurance Regulatory and Development Authority (IRDA). Additionally, the association has constructed residential apartments in Kerala without fulfilling the tax obligations.
On June 19, 2023, the Directorate General of Goods and Services Tax Intelligence (DGGI) issued a notice requiring compliance with the GST laws. Consequently, this compelled the association to initiate the process of applying for GST registration. In response to the notice, a reply was submitted requesting additional time for completing the registration procedure.
Following that, on June 23rd, the Directorate General of Goods and Services Tax Intelligence (DGGI) sent an email to the Secretary of IMA, requesting a comprehensive list of immovable properties registered under the IMA Kerala branch. However, on June 26th, 2023, the IMA took the matter to the High Court of Kerala, seeking an injunction to prevent the GST officials from attaching the properties.
In their writ petition, the IMA has asserted that there exists a correlation between the contributors and the participants, all of whom are doctors. They argue that no services are provided by any external individuals, thereby establishing the ‘Doctrine of Mutuality.’ According to the IMA, since all members know each other and there are no external parties involved in providing the services, this doctrine applies.
However, in response to the doctrine, the DGGI added that the clause (aa) was added to section 7(1) of the CGST to nullify the mutuality principle. The explanation of the Section 7(1)(aa) states that the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another.
Thus, according to DGGI, the IMA is liable to pay the GST liability as their activities are non-charitable in nature though they registered as a “charitable association.”
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