UNION BUDGET 2021

A PERSPECTIVE – PART-2

- Adv Sherry Samuel Oommen

In the earlier article, I had shared my views on India Inc's future and my views on the direct tax proposals in the Union Budget 2021. In this article, I intend to discuss some of the key indirect proposals in the context of the amendments effected in the laws governing Goods & Services Tax (“GST”). As a precursor, it is indeed saddening to note that the Government despite its avowed objective of being against retrospective amendments, has made certain amendments retrospectively intending to nullify judgments of the Hon’ble Supreme Court.

Key amendments

1. The Finance Bill has proposed to amend the definition of the term “supply” to retrospectively cover transactions between a club and its members. It deserves to be noted that the Hon’ble Supreme Court in State of West Bengal Vs Calcutta Club & Others (2019) 19 SCC 107 held that services provided by a club to its members tantamount to self-service, which is not liable to service tax. The non-applicability of service tax was based on the doctrine of mutuality, which is premised on the theory that a person cannot make a profit from himself.

Further, an amount received from oneself cannot be regarded as income and taxable. Pertinently, the Government has sought to nullify this common law principle. Consequently, transactions between the club and its members and vice versa would now be subjected to GST.