Summary
Haj Group Organisers and private tour operators, which sell Haj and Umrah packages, challenged their liability to service tax (and later IGST/GST) and the rejection of their request for exemption. The Supreme Court dismissed the writ petitions. Under the Place of Provision of Services Rules, 2012, which match the IGST Act on this point, the place of provision is the pilgrim's usual residence in India, so the service is provided in the taxable territory. The exemption for conducting a religious ceremony does not cover tour operators, who only arrange travel, stay, food and foreign exchange. A composite package cannot be split to claim exemption for part of it. Exempting only the Haj Committees, which are non-profit statutory bodies under government control, rests on a reasonable classification and does not violate Article 14. The question of extra-territorial operation was left open.
Issues
- Whether service tax (and later IGST/GST) is leviable on Haj and Umrah packages that HGOs and PTOs provide to pilgrims, given that the pilgrimage is performed in Saudi Arabia.
- Whether these services fall within the exemption in paragraph 5(b) of the Mega Exemption Notification of 20.06.2012 for services by way of conduct of any religious ceremony, or the corresponding GST exemption.
- Whether exempting only services by specified organisations such as the Haj Committees under paragraph 5A, while denying exemption to HGOs and PTOs, violates Article 14.
Provisions considered
- Sections 66B and 66C, Finance Act, 1994Under the negative-list regime from 01.07.2012, tax is levied on all services, other than those in the negative list, that are provided or agreed to be provided in the taxable territory. Section 66C supports the rules on the place of provision. (¶¶ 34, 35)
- Rules 2(h), 2(i), 3, 4, 6, 8 and 9, Place of Provision of Services Rules, 2012The HGO is located at its registered premises in India, and the unregistered pilgrim at his usual place of residence in India, so under Rules 3 and 8 the service is provided in India. Rule 4(b) does not apply because these are not performance-based services, and Rule 6 does not apply because Haj is not an 'event'. (¶¶ 39, 40, 41, 42, 43)
- Sections 2(14), 5(1), 12 and 13, Integrated Goods and Services Tax Act, 2017These provisions largely match the 2012 Rules. The recipient's location is his usual place of residence in India, so the HGO's package remains taxable after 01.07.2017. (¶¶ 39, 42, 55)
- Paragraphs 5(b) and 5A, Mega Exemption Notification No. 25/2012-STParagraph 5(b) exempts a service provider who conducts a religious ceremony, such as a priest; it does not cover facilitating a pilgrimage. Paragraph 5A is confined to the specified organisations, namely the Haj Committees and Kumaon Mandal Vikas Nigam. (¶¶ 46, 47, 51, 52, 53, 54)
- Sections 3, 9, 17, 30 and 31, Haj Committee Act, 2002The Haj Committees are statutory bodies under government control. They have welfare duties, a statutory fund and no profit motive, so they form a separate class from HGOs. (¶¶ 57, 58, 60)
- Article 14, Constitution of IndiaThe classification rests on an intelligible differentia with a rational nexus to the object of the exemption. In fiscal and economic matters the Court gives latitude and exercises judicial restraint. (¶¶ 57, 60, 64, 65)
Held
- Haj Group Organisers are located at their registered premises in India. The pilgrim, being unregistered, is located at his usual place of residence in India. Under Rules 3 and 8 of the 2012 Rules, the place of provision is therefore the recipient's location in the taxable territory, and Section 66B applies to the package. (¶¶ 39, 40, 43)
- HGOs do not render performance-based services, so Rule 4(b) does not apply. A religious ceremony or pilgrimage is not an 'event' under Rule 6, read ejusdem generis. Even if the service were transport, Rule 9 and Section 12(10) of the IGST Act would not take it out of tax. (¶¶ 40, 41, 42)
- The CESTAT and High Court decisions relied on, including All-India Federation of Tax Practitioners, concerned the regime before 01.07.2012 and do not apply to the negative-list regime. (¶ 45)
- Paragraph 5(b) exempts a service provider who conducts a religious ceremony, such as a priest performing a puja. HGOs only arrange air travel, accommodation, food, foreign exchange and registration with Tawafa establishments. The notification distinguishes 'religious ceremony' in paragraph 5(b) from 'religious pilgrimage' in paragraph 5A. As there is no ambiguity, the rule of liberal construction for beneficial exemptions in Mother Superior Adoration Convent does not arise. (¶¶ 51, 52, 53)
- HGOs charge a single price for a comprehensive package. It cannot be split so that air travel and foreign exchange are taxed and the rest is treated as exempt. No part of the package is a service by way of conducting a religious ceremony. (¶ 54)
- There is no material change under the IGST and CGST Acts from 01.07.2017. The recipient is located in India, so the HGOs' supply remains taxable. (¶ 55)
- That different providers render the same service to the same recipients does not by itself prove discrimination; classification is judged by reference to the taxable persons. The Haj Committees are statutory, government-controlled bodies with welfare duties and statutory funds, and they make no profit. HGOs are commercial operators. Confining the paragraph 5A exemption to the specified organisations is a reasonable classification with a nexus to its object, and the Fitment Committee's reasons were relevant. (¶¶ 57, 58, 59, 60, 62, 64, 65)
- Extra-territorial operation of the service tax law was not decided and was left open, as the parties asked. The challenge to the validity of the 2012 Rules and the ground under Article 25 were not pressed or substantiated. (¶¶ 7, 44, 66)
Result
Writ petitions dismissed; no order as to costs. The issue of extra-territorial operation of the service tax regime was left open for appropriate proceedings.