Haj Group Organizers Are Not Performing Religious Ceremonies, Can't Claim GST Exemption : Supreme Court

The Supreme Court has held that Haj Group Organisers (HGOs) or Private Tour Operators(PTOs) cannot seek exemption from the Goods and Services Tax(GST) for their services as per the Mega Exemption Notification issued under the GST Act(All India Haj Umrah Tour Organizer Association Mumbai v. Union of India And Ors)

The notification provided exemption for "conduct of any religious ceremony" as stated in its Clause 5(b). The Court said that HGOs are not conducting any religious ceremony by themselves and are only facilitating the Haj pilgrimage.

Haj pilgrimage is a five-day religious pilgrimage to Mecca and nearby Holy places in Saudi Arabia. A bilateral agreement is executed every year between the Government of India and the Kingdom of Saudi Arabia to enable Haj pilgrims of India to undertake the pilgrimage. The said agreement sets out a certain number of pilgrims, who can undertake Haj from India. 30% of this quota is allocated to HGOs and the rest is assigned to the Haj Committee, which is a statutory body

HGOs render services such as, purchasing flight tickets, arranging and making payments for accommodation in Saudi Arabia, arranging and making available food during their stay in Saudi Arabia, arranging and making payments for transportation in Saudi Arabia and providing foreign exchange in the form of Saudi Riyals.

The Court held that HGOs cannot be held to be performing any religious ceremony.

"The service rendered by HGOs to Haj pilgrims is to facilitate them to reach at the destination to perform rituals/religious ceremonies. No religious ceremony is performed or conducted by the HGOs. The religious ceremony is conducted by Haj pilgrims or by someone else in the Kingdom of Saudi Arabia", the Court observed.

"...adverting to sub-clause (b) of Section 5, we find that the exemption has been granted in respect of services by a person by way of conduct of any religious ceremony. Thus, 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. It only exempts service provided by way of conduct of any religious ceremony", the Court explained.

The Court also noted that another clause in the Mega Exemption Notification, Clause 5B, exempted "services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement". The specified organizations as per this clause are Kumaon Mandal Vikas Nigam Limited (which organizes the Kailash-Manasarovar Yatra) and Haj Committee (a statutory body).

Therefore, the Court noted that the notification clearly makes a distinction between "conduct of any religious ceremony" and "services in respect of a religious pilgrimage" and only specified organizations can claim exemption for the latter.

"If the intention and object was to provide service tax exemption to services provided by HGOs in respect of religious pilgrimage, the notification would have specifically provided so. However, the exemption as regards religious pilgrimage has been confined only to the services rendered by the specified organisations in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India under a bilateral arrangement. An exemption has not been provided to any other service provider rendering service in respect of a religious pilgrimage. Whereas, sub-Clause (b) of Clause 5 is applicable to services rendered by way of conduct of any religious "ceremony". A clear distinction has been made between a service provided in respect of religious pilgrimage and a service rendered by way of conduct of any religious ceremony"

The Court cited an example to explain its position :

"We may give an example of a person engaging a priest to perform certain religious ceremonies or ritual or puja on his behalf. In such a case, the priest renders service by way of conducting a religious ceremony. The service rendered by HGOs to Haj pilgrims is to facilitate them to reach at the destination to perform rituals/religious ceremonies.No religious ceremony is performed or conducted by the HGOs. The religious ceremony is conducted by Haj pilgrims or by someone else in the Kingdom of Saudi Arabia".

A Bench comprising Justices A.M. Khanwilkar, A.S. Oka and C.T. Ravikumar was deciding a batch of petitions filed by a number of Haj Group Organizers (HGOs) or Private Tour Operators (PTOs) seeking exemption from service tax (now, GST) for Haj and Umrah services offered by them to Indian pilgrims travelling to Saudi Arabia.

Services of HGOs cannot be bifurcated as within India and abroad

The Court observed that the services rendered by the Haj Group Organizers (HGOs) to the Indian Haj pilgrims cannot be bifurcated into two parts - services provided within taxable territory and those provided outside the taxable territory - for the purpose of tax exemption. It clarified that the tax recipient being located in the taxable territory (India), service tax can be levied on the service provided by HGOs.

The petitioners had argued that though, generally, exemption notification should be interpreted strictly and in case of any ambiguity ought to be interpreted in favour of the revenue, when the exemption is for beneficial purposes, it should be liberally interpreted, as had been held in Government of Kerala And Anr. v. Superior Adoration Convent.

In this context, the Court was implored to liberally interpret Clause 5 of the Mega Exemption Notification, exempting tax on services provided by organisations in respect of a religious pilgrimage.

The Court noted that the benefit of exemption would be granted to services provided by specific organizations as mentioned in the Mega Exemption Notification and the HGO is not one of them. It was clarified that Clause 5A grants exemption to the service rendered by Haj Committees in respect of a religious pilgrimage. The HGOs have no role to play in actual conduct of religious ceremonies, which are a part of Haj pilgrimage.

It is noted that even under Clause 5(b) of the Mega Exemption Notification, which grants exemption to service rendered for conduct of any religious ceremony, HGOs would not qualify as they do not perform rituals/ religious ceremonies; but merely renders service to facilitate Haj pilgrims to reach their destination to perform rituals/religious ceremonies.

The Court rejected the submission made by the petitioners to bifurcate the services rendered by HGOs into two parts. It was urged by the petitioner that the first part would comprise service regarding providing of air booking and making available foreign exchange - for which service tax/GST would be payable. However, for the rest of the services tax will not be payable as the services rendered are outside the taxable territory. The Court opined that the services of the HGOs cannot be divided into parts, as the HGOs charge for the 'comprehensive package' and not separately for different services forming a part of the said package.

Moreover it noted that those receiving HGOs service are located in India. Service being rendered to the service recipient who is located in the taxable territory, the Court held that the service provided by HGOs is taxable for service tax.

It was considered that no material changes have been brought about by the GST or IGST Acts, in this respect.

Issue of Discrimination

The petitioners argued that there is discrimination under the Mega Exemption Notification between the services rendered by specified organisations and the services rendered by other service providers in respect of religious pilgrimage. It was submitted that services rendered by the Haj Committee and the HGOs are the same. Nature of service being the same, it contended that the Haj Committee cannot constitute a class in itself. The petitioners averred that by treating unequals equally, Revenue has violated Article 14 of the Constitution of India.

Treating Haj Committees as a separate class was assailed by the petitioners. However, the Court observed that classification founded on intelligible differentia and bearing a nexus to the object sought to be achieved by the classification is permissible. It further opined -

"While we examine this question in the context of the infringement of Article 14 of the Constitution of India, it must be remembered that only on the ground that both HGOs and the Haj Committee render service to the same class of persons, the classification made by treating the Haj Committee as a separate class, cannot be questioned."

It was also of the view that different classes of service providers rendering the same service to the same class of service recipients would not per se, amount to discrimination.

The Court took note of the fact that the duties and function of the Haj Committee is more elaborate than that of the HGOs.

"The Haj Committee is a statutory committee which is entrusted with various functions for the welfare of Haj pilgrims. Moreover, the profit motive is completely absent in the case of the Haj Committee. The money received by the Haj Committee from the pilgrims for rendering service goes to a statutory fund created under the 2002 Act which is to be used only for the purposes specified in the 2002 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 observed that the object of the exemption was to promote the activity of the specified organisations in rendering service for the religious pilgrimage. The service rendered by the specified organisations are controlled by the Government and is not with the object of making profit. The Court was satisfied that there is indeed a nexus between the classification made and the object sought to be achieved by granting exemptions.

"We are of the considered view that the arguments based on discrimination have no substance at all, as HGOs and the Haj Committees do not stand on par and in fact, the Haj Committees constitute a separate class by themselves, which is based on a rational classification which has a nexus with the object sought to be achieved", the judgment authored by Justice Oka stated.

The Court clarified that the argument raised by the petitioners regarding extra territorial application of GST for services given outside India is kept open, as it is pending consideration before another bench

Senior Advocates Arvind P Datar and Gopal Shankaranarayan appeared for the petitioners. Additional Solicitor General N Venkataraman appeared for the Union.

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

Citation : 2022 LiveLaw (SC) 632

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