The Goods and Services Tax (GST) regime is a step in the right direction. But many devout Hindus are worried owing to the lack of clarity on the applicability of GST on temples and religious institutions, and especially whether pilgrim cottages and shelters will be taxed.
Many religious places provide ‘prasadam’ in their precincts, and this includes breakfast or meals like lunch or dinner. The devotees are charged a token amount for the ‘prasadam’ and there is no intention of making any profit out of these charges whatsoever. Most of the times, these charges are highly subsidised by other donations received at the religious places.
In an interesting case a few years ago, the government proposed to levy tax on ‘prasadam’ distributed by temples without exception to the ‘prasadam’ in the form of ‘ladoos’ distributed by the Tirupati Devasthanam.
Taxmen considered ‘prasadam’ as a commercial good, as some money was being collected towards its distribution. But the tribunal applied the principles of sound reasoning, good conscience and fair-mindedness to hold that offerings at the altar of the Lord cannot be considered as a commercial commodity. The government later issued a notification exempting ‘prasadam’ from tax.
In terms of provisions of section 7(1)(a) of the CGST Act, 2017, the expression ‘supply’ includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Here, it appears that a religious place supplying ‘prasadam’ may not be considered as ‘supply’.
However, in terms of provisions of section 7(1)(d) of the CGST Act, 2017, supply includes the activities to be treated as supply of goods or services as referred to in Schedule II. In terms of clause (b) of Paragraph 6 of Schedule II, the supply may be by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration shall be treated as supply of service.
Since the proposed list of exempted services for GST does not include even non-air-conditioned premises supplying food, there are chances of unwarranted litigation if the department demands GST on such activity of supplying ‘bhojan prasadam’ by taking a view that exemption granted to non-air-conditioned joints is now no more applicable.
But heeding the requests of Andhra Pradesh and Uttar Pradesh, the Centre has already exempted ‘prasadams’ being provided/sold at various temples in the country from the GST.
The TTD Case
The question now arises on the taxation on cottages. It would be contextual to consider the conflict that arose in 2011 between the TTD and the Superintendent of Central Excise and Service Tax, Tirupati. The TTD was issued notices by the Central Excise and Service Tax, Tirupati, for being registered as ‘accommodation service’ for the purpose of levy of service tax under the Finance Act.
The TTD contested the notices but an order was issued on May 25, 2011, stating that the TTD should obtain service tax registration immediately under the category of ‘accommodation service’ and pay service tax effective May 1, 2011.
Aggrieved, the TTD filed a writ petition contending that it is not a club or an association. It argued in the High Court that it is a religious and charitable institution and is running guest houses without any profit motive.
The High Court asked the TTD to show if there was any exemption that has been granted. In the order dated May 25, 2011, of the Central Excise and Service Tax Department, there is a mention of an exemption of 50% by a notification dated May 1, 2006, read with notification dated April 25, 2011. However, there is no absolute exemption granted to the TTD.
Cottages in Tax Net
Clause 65(105) of Finance Act, has a sub-clause (zzzzw), which deals with the applicability of service tax to the following category of persons: “65(105)(zzzzw) to any person by a hotel, inn, guest house, club or campsite, by whatever name called, for providing of accommodation for a continuous period of less than three months.”
Since there is no doubt that the TTD is running guest houses, irrespective of their nomenclature, the court found no error in the view taken by the Central Excise and Service Tax department.
After this judgment, the undivided AP government exempted the TTD from the payment of any such taxes in 2012. But now, the situation is back to square one. In the new GST 2017 regime, no such exemptions are valid for TTD or any such temple for that matter.
With the GST regime, each and every temple would have to go through such individual litigations. There is a need to amend the definitions clause and exclude religious institutions from the purview of GST.
TTD, being a premier religious institution, was granted immunity under VAT, which was under the purview of the State government. Now that the Union government is implementing GST from July 1, it has to be examined whether the TTD falls under the ambit of the dealer definition. In fact, the TTD or for that matter any temple or religious institution cannot be registered as a dealer. The nomenclature would hurt the religious sentiments of devotees.
(The author is president, Telangana Archaka Samakhya)