GST on Societies/Clubs and their Members - Is History repeating itself, or a new chapter in the making?

Ritu Mehta | Last updated: 07 May 2025

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Quick Summary

This article examines the taxability of transactions between members and their clubs or societies under the GST regime. It delves into the historical application of the 'principle of mutuality', which previously exempted such transactions from sales and service taxes. The discussion then analyses how the GST Act, particularly after amendments in 2021, now treats these activities as taxable supplies, even retrospectively from 2017, by deeming members and associations as distinct persons.

Introduction The transactions between society/ clubs and its members have seen unending litigation under the erstwhile Indirect Taxes regime and the same is also continuing in the GST regime. Taking cue of the judicial precedents and the principles enunciated in the past, the article aims to cover

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FAQ :

The principle of mutuality, originating from English law and adopted in India, suggests that clubs and their members are considered a single entity. This means transactions between them are not subject to tax as there are no two distinct parties involved.

Before GST, landmark Supreme Court decisions like the one concerning Calcutta Club Limited held that the principle of mutuality meant that sales or services provided by incorporated or unincorporated associations to their members were not liable for sales tax or service tax.

Under Section 7 of the CGST Act, 'supply' includes all forms of sale, transfer, barter, exchange, licence, rental, lease, or disposal of goods or services or both, made or agreed to be made in the course or furtherance of business for a consideration.

An amendment to Section 7 of the CGST Act in 2021, effective retrospectively from July 1, 2017, now deems associations and their members as distinct persons. This brings their transactions, made for cash, deferred payment, or other valuable consideration, under the ambit of GST.

The amended Section 7(1)(aa) of the CGST Act applies to activities or transactions by a person (other than an individual) to its members or constituents or vice-versa, for cash, deferred payment, or other valuable consideration. If consideration is missing, the activity may not be considered a supply under GST.