Retrospective effect of new Sec 7(1)(aa)

[g srikanth]

The newly inserted Sec 7(1)(aa) of the CGST Act comes into force from 1 Jan 2022, but has retrospective effect from 1 July 2017. This requires clubs and associations to pay GST on contributions from Members which was hitherto held to be NOT a service by the Supreme Court in the Calcutta Club Judgement based on the principle of mutuality. The amendment has created unique problems for Clubs and Associations as well as for members. Such of the clubs or associations who are unable to collect from members who are no longer members have to fork out the GST from their own pockets. Further, members who have contributed to Associations towards various building funds etc will now have to pay against debit notes for a period of 4 years and 6 months. This affect the members in two ways - one is the difficulty in finding cash to pay the GST for 4 1/2 years; and the other is to have enough output liability to adjust the payments. Thus, the retrospective amendment that was carried out to overcome Calcutta Club has been passed with no regard for difficulties faced by tax payers. Members may share their views on these mindless amendments.

AI Summary

Retrospective GST Amendment: Clubs Must Pay GST on Member Contributions Since 2017, Overturning Previous Supreme Court Ruling The newly inserted Section 7(1)(aa) of the CGST Act, effective from January 1, 2022, applies retrospectively from July 1, 2017. This change requires clubs and associations to pay GST on member contributions, reversing the Supreme Court's previous stance in the Calcutta Club case. The amendment poses challenges for clubs unable to collect from former members and for members needing to pay GST for over four years. Respondents suggest raising the issue with the GST Council, noting the retrospective amendment's inconvenience and potential for unnecessary litigation. Some argue the government's intention was always to tax these activities, despite the retrospective nature of the amendment.