Applicability of GST on RWA up to 31/12/2021

Introduction: Very recently, during the course of discussions on the topic GST on RWA, I was informed that a friend of mine got a Show Cause Notice during end of June 2025 raising huge demand of GST  from the RWA  for the period starting from 01/04/2018 itself.

As the section 7 was amended only on 01/01/2022 by enhancing the scope of supply as applicable to RWA, it is proposed to discuss the applicability of GST on RWA up to 31/12/2021.

1. In order to get a logical conclusion, I put below few facts which are undisputed.

• The law on GST was made applicable in India with effect from 01/07/2017.
• The Finance Bill 2021 was introduced in the parliament on 01/02/2021. Clause 99 of the said bill is on proposed amendment in Section 7 by way of insertion of clause aa which reads as below: “the 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”.
• Accordingly, the term which is on supply under the GST Law was first proposed to be made applicable for RWA only through the Finance Bill 2021 on 01/02/2021.
• The Finance Bill was subsequently passed in both the houses of parliament and enacted as The Finance Act 2021 on 28/03/2021.
• Through Notification Number 39/2021 Central Tax  dated 21/12/2021, the Central Government has appointed 01/01/2022 as the date on which the above amendment shall come in to force.

2. Reference is invited to Gazette notification dated 28/03/2021 on the Finance Act 2021, the clause 108  which is reproduced below:

108. In the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Central Goods and Services Tax Act), in section 7, in sub-section (1), after clause (a), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of July, 2017, namely:–– Amendment of section 7. “(aa) the 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. Explanation.––For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, 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;”.

Views: Despite the fact that the Kerala High Court in their order dated 11/04/2025 in the matter of Indian Medical Association, Kerala Versus Union Of India, State Of Kerala, GST Council, Additional Director General, Directorate General Of Gst Intelligence, Kochi, Deputy Director, Directorate General Of GST Intelligence, Kozhikode (Vice Versa) - 2025 (4) TMI 872 - KERALA HIGH COURT has taken a view that GST is not applicable to RWA as on date and it requires constitutional amendment, let us see whether tax can be demanded by GST department for the period from 01/07/2017 till 31/12/2021.

It was felt necessary by the Legislature  that the present law as it stood as on 01/02/2021 was not enforceable for GST from RWA and accordingly, clause 99 of the Finance Bill 2021 was introduced. The same was duly passed by parliament, bill was enacted and the section 7 amendment was made effective from. 01/01/2022 as per facts tabulated above.

The question is only because the law is amended with retrospective effect from 01/07/2017 itself and the explanation clarifies  the same to support the stand that tax is applicable from 01/07/2017 itself, whether GST is attracted on RWA prior to 01/01/2022?.

The answer is NO. Based on the judicial rulings prevalent up to 31/12/2021, GST can not be demanded from RWA up to 31/12/2021. This is proved to be correct from the amendment to section 7 itself which is effective only from 01/01/2022 as per gazette notification dated 28/03/2021.

To conclude, how a person can expect the proposed amendment in Finance Bill 2021 and start paying tax from 01/07/2017 itself?. If the answer is YES, then what was the need for the amendment to section 7 by way of insertion of clause aa in the Finance Bill 2021?.