Tamil Nadu AAR Holds Member Subscription Fees and Services by Medical Associations Are Taxable Supplies Under GST, Mutuality Principle Inapplicable

Tamil Nadu Authority for Advance Ruling (AAR) has delivered a significant ruling on the GST implications for activities conducted by the Coimbatore Branch of the Indian Medical Association. The applicant, a long-standing medical association, sought clarity on whether its core activities—conducting health camps for the underprivileged and organizing seminars for medical professionals—would be considered as business or supply under the Central Goods and Services Tax Act, 2017 (CGST Act), particularly in light of the principle of mutuality and the exemption for healthcare services.

The applicant argued that its activities, primarily aimed at public welfare and professional development, should not be treated as taxable supplies. It relied on judicial precedents supporting the mutuality principle, which traditionally holds that a club or association and its members are not distinct entities for tax purposes. The applicant also highlighted that healthcare services are exempt under Notification No. 12/2017-Central Tax (Rate).

During the personal hearing, the applicant’s authorized representative reiterated that member subscriptions are treated as donations used for health camps and training, and sought specific clarity on the GST liability for lifetime subscriptions. The applicant also referenced a Kerala High Court judgment, which addressed the retrospective application of the relevant GST amendment.

Legal Reasoning and Findings

The AAR examined the queries in detail. First, it held that activities such as collecting subscriptions and providing services to members, including organizing educational seminars and workshops, fall squarely within the definition of ‘business’ under Section 2(17)(e) of the CGST Act, 2017. The provision explicitly includes the provision of facilities or benefits by an association to its members for a subscription as a business activity, regardless of the ultimate objective.

On the second query, the AAR addressed whether these activities constitute a ‘supply’ under Section 7(1)(aa) of the CGST Act, even when provided on the ground of mutuality. The Authority noted that the Finance Act, 2021 inserted Section 7(1)(aa) with retrospective effect from 1 July 2017, clarifying that transactions between an association and its members are deemed to be between two separate persons. The explanation to this section overrides the mutuality principle and any contrary judicial precedents. Therefore, the collection of subscriptions and provision of member services are considered taxable supplies under GST.

Regarding the third query, the AAR confirmed that member subscription fees collected by the association are to be treated as a supply under GST, following the same reasoning as above.

The Authority also addressed the applicant’s contention regarding the exemption for healthcare services. While healthcare services provided to the public remain exempt under the relevant notification, the activities in question—namely, member subscriptions and professional seminars—are distinct supplies and do not qualify for exemption merely because the association’s broader objective is to promote healthcare.

Conclusion and Ruling

The AAR ruled that:
1. Collection of subscriptions and provision of services to members, including educational seminars and workshops, are ‘business’ under Section 2(17)(e) of the CGST Act, 2017.
2. These activities are ‘supplies’ under Section 7(1)(aa) of the CGST Act, 2017, and the mutuality principle does not apply due to the statutory deeming provision.
3. Member subscription fees are taxable supplies under GST.

This ruling provides clear guidance that associations and clubs cannot rely on the mutuality principle to avoid GST on member-related transactions, and such supplies are taxable unless specifically exempted.