“IMA vs. DGGI: Unveiling the Charitable Status Debate”

Dismantling the ‘Mutuality’ Argument: DGGI’s Case Against IMA

The Directorate General of GST Intelligence (DGGI) has presented additional evidence before the Kerala High Court, challenging the charitable status of the Indian Medical Association (IMA). This evidence suggests that the IMA, primarily an association of allopathy doctors, operates more as a corporate entity engaged in product endorsement, land deals, and profit generation, rather than a charitable organization.

Background of the Case

Following extensive investigations into the activities of the IMA since November 2022, the DGGI accused the doctors’ body of non-payment of Goods and Services Tax (GST) in June 2023. The DGGI claims that over 90% of the IMA’s activities are non-charitable and seeks to bring the organization within the GST framework.

The ‘Mutuality’ Argument

In response, the IMA invoked the principle of mutuality, arguing that as an association formed exclusively for its members (all of whom are doctors), it should be exempt from taxation. The crux of this argument is that no service is being provided by one person to another within the association, as both contributors and beneficiaries are the same individuals.

DGGI’s Counterarguments

The Union Government, represented by the DGGI, has contested the IMA’s ‘mutuality’ argument in the High Court. According to the DGGI, many of the IMA’s activities deviate from the principle of mutuality. The evidence presented includes instances of commercial transactions involving non-members, raising doubts about the charitable nature of the organization.

Commercial Activities Highlighted

One such example cited by the DGGI is the operation of a liquor bar by the IMA Cochin Charitable Society, which sells liquor to non-members. Additionally, the renting out of rooms in IMA House to non-members and the transfer of funds from profit-making entities of the IMA for various activities raise questions about the organization’s charitable status.

Concerns Raised

The DGGI has raised concerns about potential money laundering through these activities, particularly highlighting the transfer of funds from profit-making entities to the IMA without tax payment. Furthermore, the association’s involvement in product endorsement and sponsorship deals, such as with Kent RO Systems and Asian Paints, has raised questions about independence and autonomy.

Conclusion

The ongoing legal battle between the DGGI and the IMA underscores the complexities surrounding the taxation and charitable status of professional associations. As the case progresses in the Kerala High Court, it brings to light broader questions about the regulatory oversight of organizations engaged in both professional and commercial activities.