The Indian Medical Association ( IMA ) Kerala is facing serious allegations of avoiding Goods and Services Tax ( GST ) payments with unpaid taxes estimated at Rs. 45 crore. This caused the district registrar in Thiruvananthapuram to launch an investigation into the IMA’s financial activities following a report from the Directorate General of GST Intelligence ( DGGI ).
The investigation will focus on whether there are errors in the IMA’s financial records and whether it has broken any registration rules. Authorities will review the IMA Kerala chapter’s balance sheets and income-expense records since it was registered. They will also look into the earnings of its subsidiaries, including:
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Despite its status as a registered non-profit, the DGGI has discovered various commercial activities by the IMA that contravene its claimed charitable operations. Investigators revealed that the IMA runs a liquor bar and rents out rooms to non-members, activities deemed taxable under GST laws.
The Kerala High Court recently ruled that the IMA is liable to pay GST on goods and services provided to its members, rejecting its argument of tax exemption under the “principle of mutuality.”
The High Court explained that the IMA’s operations extend beyond the scope of a charitable organization or club, bringing it squarely under the GST ambit. These activities challenge the IMA’s long-held assertion of being a non-profit entity.
The court dismissed the petition citing Section 7(1)(aa) of the GST Act. This amendment classifies transactions between a club or association and its members as taxable deeming the association and its members as separate entities.
The court ruled that the IMA’s liability to pay GST for services to its members would have a prospective effect starting January 1, 2022. It also pointed out that the IMA’s activities, which extend beyond charitable work, fall under the purview of taxable commercial transactions. (read full case)
Preliminary findings from the registration Inspector General indicate that subsidiaries like IMAGE, PEPS, and Periyar Guest House may not even be independently registered, a potential breach of registration regulations. The lack of proper documentation, coupled with accusations of falsified balance sheets, strengthens the case against the IMA.
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If the allegations are substantiated, the IMA could face severe financial penalties, with implications for its tax obligations and operational structure. The ongoing investigation is to determine whether the IMA deliberately manipulated its accounts to evade taxes.
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