SC rejects pleas seeking exemption from GST on services rendered to Haj pilgrims

New Delhi: The Supreme Court Tuesday dismissed the pleas against the levy of service tax on services rendered by Haj group organizers (HGOs) or private tour operators (PTOs) to Haj pilgrims, saying the service is provided or agreed to be provided to the recipients who are in the “taxable territory” of India.

The apex court observed that issues concerning the grant of exemptions in tax matters are a matter of policy.

A bench headed by Justice A M Khanwilkar delivered its verdict on a batch of pleas in which the broad question was about the liability of HGOs or private tour operators (PTOs) to pay service tax on the service rendered by them to Haj pilgrims.

The apex court noted that the Haj pilgrimage is a five-day religious pilgrimage to Mecca and nearby holy places in Saudi Arabia and the HGOs render services to the Haj pilgrims by purchasing flight tickets, arranging and making payments for accommodation in Saudi Arabia, and other arrangements there.

“Therefore, the service rendered by the HGOs to Haj Pilgrims is taxable for service tax as the service to Haj pilgrims is provided or agreed to be provided in taxable territory. The service is rendered by providing or agreeing to provide Haj pilgrimage tour package,” the bench, also comprising Justices A S Oka and C T Ravikumar, said in the 78-page judgement.

“Therefore, there is no merit in the challenge in the petitions. We have already clarified that we have not dealt with the issue of extra-territorial operation of the service tax regime which is kept open to be decided in appropriate proceedings, as requested by the parties,” it said.

The bench said as far as services rendered by HGOs are concerned, there is no material change brought about by the GST (Goods and Services Tax) and the IGST (Integrated Goods and Services Tax) Acts except for the fact that service tax is chargeable under these two statutes and not under the Finance Act.

“Thus, the HGOs supply service to the service recipient having the location in India. The service is rendered by providing a package for the Haj pilgrimage to the service recipient who is located in the taxable territory. That is how the service provided by HGOs is taxable for service tax,” it said.

The top court also dealt with the submissions of the petitioners, who contended that there is no difference between the service rendered by the HGOs and the service rendered by the Haj Committee to the Haj pilgrims.

It noted that Haj Committee has an important duty to assist the pilgrims in distress and one of the duties is to finalize the annual Haj Plan with the approval of the Central government and execute the same.

“Thus, the Haj Committees are statutory bodies working under the control and supervision of the Government. The Haj Committees are the agencies and instrumentalities of the State,” it said.

The bench said when the Haj Committee facilitates Haj pilgrims by making arrangements for their visit to the Kingdom of Saudi Arabia for undertaking the pilgrimage, there is a complete absence of profit motive.

The court noted that even the budget of the Haj Committee is required to be submitted to the Central government.

“Thus, the Central government has all pervasive control over the Haj Committee. The state governments have the same control over the state committee,” it said.

“On the other hand, there are no onerous duties attached to HGOs. They earn profit by rendering service to Haj pilgrims. Except for the stringent conditions for the registration, the government has no control over HGOs,” the bench said.

The top court said the money received by the Haj Committee from the pilgrims for rendering service goes to a statutory fund created under the Haj Committee Act, 2002 which is to be used only for the purposes specified in the Act.

“That is the reason why the Haj Committee constitutes a class in itself when it comes to rendering service to Haj pilgrims. It is a separate class as distinguished from HGOs,” it said.

The bench further said, “We have already held that there is a rational basis for classifying specified organisations as a class and keeping out the Private Tour Operators from exemption under Clause 5A. We will have to show judicial self-restraint in this case.

It said the arguments based on alleged discrimination have no substance at all as the HGOs and the Haj Committees do not stand on par.

The bench also dealt with the aspect of whether the exemption granted under the Mega Exemption Notification of June 2012 will apply in this case.

“The notification does not say that service provided to the service receiver to enable him to conduct a religious ceremony, has been exempted. It only exempts service provided by way of conduct of any religious ceremony,” it noted.

The apex court said the service rendered by HGOs to Haj pilgrims is to facilitate them to reach the destination to perform rituals/religious ceremonies.

“No religious ceremony is performed or conducted by the HGOs,” it said.

It noted that some of the HGOs and PTOs had earlier filed petitions in the apex court to challenge the levy of service tax on the service regarding Haj pilgrimage and by an order in December 2019, the court had directed them to make a representation to the government for grant of exemption from service tax.

It said a detailed representation was made by some of the petitioners on December 19, 2019, and the GST council, by its March 14, 2020 order, rejected the representation based on the recommendation of the Fitment Committee.