What if you have to pay GST for GST-exempt services sold in the past?


What if you have to pay GST for GST-exempt services sold in the past?
Sep, 2021
By Vikash Dhanania

Namaskar DOST!

I hope you find this email while you calculate the figures for the most profitable quarter in your business so far!

I want to start this email with a question –

What if you get a notice from the Department to pay GST for services which were exempt from GST in the past?

What if the notice says you have to pay the GST for all such services purchased in the last 3 years?

I know this sounds vague, but this is exactly what may be happening with associations, clubs etc. that work on the Principal of Mutuality because of the retrospective levy in GST.

What is the matter about?

To understand the entire situation, you need to know about the introduction of The Finance Act 2021 dated 28/03/2021 w.e.f. 01/07/2017.

Amendment of section 7.

In the Central Goods and Services Tax Act, 2017 (12 of 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:––

“(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;”.

This is happening around the time when big companies like Vodafone Group have won international arbitrations against the levy of retrospective taxes. Government proposes to withdraw the retrospective tax bill that hounded Vodafone, Cairn for years

The problem may also arise for Resident Welfare Associations, where tax is not being paid on the receipt like the amount received towards the transfer fee for transferring a unit in the community.

This means that associations/members will have to pay GST for the period starting from 2017 for all amounts paid till today!

Yes, you read that right.

Our Views

Changes like these are counterproductive in nature as per our views, and the Govt. should not make such changes.

And now it is important for the Government to understand that law should be predictable and not create problems with such retrospective levies.

If you are also affected by the same problem, remember that this situation will be solved via litigation, just like the Vodafone group case.


If you have any particular questions regarding this issue or something else related to GST, feel free to contact us.

Thanks & Regards