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Synopsis

The Supreme Court today while dismissing a plea seeking GST and Service Tax exemption on the Hajj pilgrimage, has held that no religious ceremony is performed or conducted by the Haj Group Organizers (HGOs) and the religious ceremony is conducted by Haj pilgrims or by someone else in the Kingdom of Saudi Arabia.

Service rendered by HGOs to Haj pilgrims is to facilitate them to reach at the destination to perform rituals/religious ceremonies, the Court has further held.

HGOs and Private Tour Operators (PTOs) had challenged the levy of service tax on the service rendered by them to Haj pilgrims for the Haj pilgrimage.

All India Haj Umrah Tour Organizer Associations, the petitioner had sought removal of GST and Service Taxes on the Hajj services provided to Hajis of India in Saudi Arabia. For the performance of Hajj and Umrah, certain services are provided. Services include Air tickets, currency exchange, etc.

The petitioners had argued before Court that the exemption granted under the Mega Exemption Notification no.25 of 2012–ST dated 20th June 2012, will apply to them in this case.

Paragraph 5(b) of the Mega Exemption Notification provides for the exemption on services by a person by way of conduct of any religious ceremony. Paragraph 5A of the Mega Exemption Notification provides for the exemption to services by specified organisations in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement.

Notably, with effect from 1st July 2017, under the provisions of the Integrated Goods and Services Tax Act, 2017 ('IGST Act’), the same service tax regime was continued. Identical exemption notification dated 28th June 2017 ('IGST Exemption Notification’) was issued by exercising the powers under the IGST Act. Identical Exemption Notification was also issued on the same date (‘GST Exemption Notification’) under the Central Goods and Services Tax Act, 2017 ('GST Act’).

Court found that Clause 5A of the Mega Exemption Notification had no application as it is applicable to services by specified organisations, namely the Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking and Haj Committee or State Committee, in respect of a religious pilgrimage facilitated by the Ministry of External affairs of the Government of India under bilateral arrangement.

A bench of Justices Khanwilkar, Abhay Oka and CT Ravikumar further found that the exemption under the notification was granted in respect of services by a person by way of conduct of any religious ceremony.

"..it refers to a person who is naturally the service provider. The sub-Clause (b) applies when the service provider renders service by way of conduct of any religious ceremony. The notification does not say that service provided to the service receiver to enable him to conduct religious ceremony, has been exempted...", the bench remarked.

Also, the three-judge bench noted that Mega Exemption Notification made a clear distinction between ‘religious ceremony’ and ‘religious pilgrimage’.

"As Haj Committees render services only in respect of Haj pilgrimage, the religious pilgrimage referred to in Clause 5A as regards the Haj Committee, is Haj pilgrimage. Thus, the Mega Exemption Notification exempts the two specified organisations that render services in respect of a religious pilgrimage. This exemption under Clause 5A is not applicable to HGOs as the HGOs are not the specified organizations...", top court added.

Court has also held that no part of the package offered by HGOs involves a service by way of conduct of any religious ceremony.

Case Title: All India Haj Umrah Tour Organizer Association Mumbai vs. Union of India & Ors.