'Haj Group Organisers Cannot Claim GST Exemption Under 'Service By Way of Conduct of Religious Ceremony': ASG Submits Before Supreme Court

ASG N. Venkataraman: "The terms relevant are 'pilgrim', 'pilgrimage', 'HGO/PTO'. Threshold requirement in service tax law is a service provider, a service receiver, provision of service from the provider to the receiver, backed by a consideration. It is a contract driven law. HGO is only a service provider, service facilitator. The pilgrim is the recipient. It is the pilgrim who undertakes the pilgrimage. It has nothing to do with the HGO or the PTO because this pilgrimage is something which is so personal to the pilgrim, he has to follow ruthlessly the tenets prescribed by the religion. PTOs/HGOs are not trying to perform or provide any of those services which has relation to the pilgrim performing his religious rites. They are mere facility providers, picking them up, taking them to Haj"

Justice Khanwilkar: "They collect the amount as facility providers which the pilgrim is going to spend there in the religious ceremony? So that amount has to be excluded- that is the ultimate substance of the argument of the petitioners"

ASG: "The intricate, one-on-one rites which the pilgrim personally is doing are not being outsourced to anybody. Every arrangement to perform- that is the facility provided by the PTO, and for which the pilgrims or the recipients do not enter into direct contract with anybody outside India. The pilgrims may travel from Trivandrum or Chennai to Bombay by flight, they also stay based on their comfort level in a particular place, nearby or far away, a guide is appointed who takes them to the respective religious heads to do their rites. At every point of time, it is only in the nature of a facility. This is an all in one, complete package, start to finish. If you choose to go, then you go in this way. The first point is pilgrims are recipients, PTOs are service providers or facility providers in the sense that they ultimately take the pilgrim to the place of worship but the worship or the ritual has to be performed by the pilgrim as instructed by the religious head. At no point of time does it reach the domain of performing a religious ceremony"

He indicated that the Mega Exemption notification excludes 'Services by a person by way of conduct of religious ceremony'. "It does not say 'providing a facility to conduct a religious ceremony'. We can't read it that way. How do the PTOs say that they are conducting a religious ceremony? The word 'conduct' cannot be lost sight of", he urged.

Justice Khanwilkar: "What if the amount which has to be paid to the religious head for conducting religious ceremony is collected by this operator?"

ASG: "For example, somebody wants to go to Tirupati. As an individual, I can go, log in, book, pay the money for the Seva and do the Seva. In this case, the contract is between the individual and Tirupati Devasthanam. They conduct the religious ceremony, they offer a ticket, there is no service tax, no GST. On the other hand, if I entered into a contract with a private operator that six of us want to go from Chennai to Tirupati, he arranges the same, he picks up at 4, pays for the special ticket, pays for the entry ticket and drops back at home at 11:30 in the night. That contract is to arrange a pilgrimage in facilitating the pilgrim to fulfil his religious rights in a particular manner"

Justice Khanwilkar: "Take a case where the assessee says that this amount is quantified by the trust to give access to conduct of this religious ceremony and performance thereof. That amount is a known amount. So out of the total amount, that can be clearly excluded, and there can exemption to that extent?"

ASG: "The person who does the Seva may be excluded, but not me who is engaging in the entire tour. When I pay the tour operator, for me, he is the provider for the whole tour, it is his responsibility to arrange everything, not my responsibility. Therefore, he provides me the service of arranging the 'darshan'. But he is not performing the religious ceremony for me. If the pilgrim pays something to the religious head in that place and if that is subject to service tax, it is open to the pilgrim to question it, saying this is towards conduct of religious ceremony. But here we cannot figure out at all as to how much is going to Religious ceremony. It is an end to end contract...Booking for religious ceremonies is not conduct of religious ceremony"

Justice Khanwilkar: "Religious head would get exemption but not the service provider?"

ASG: "Yes. If one wants to perform four days of ceremonies in Varanasi, he is not subject to service tax. If somebody in a church performs mass and makes a contribution to an institution, that is not subject to service tax"

Justice Khanwilkar: "There are two separate contracts entered into by the service provider who is the tour operator- One contract is exclusively in relation to the charges which will be collected by this person who will be providing that service of conduct of religious ceremonies. That is a separate contract. In that contract, the tour operator does not take any charge whatsoever on actual basis. Hundred percent of whatever is paid to that religious head is collected from the recipient of the service. Tour operator is only an intermediary and he is not charging anything. Will service tax apply then?"

ASG: "Say, people in Chennai want to go to Tirupati. Travel agent says 'I am going to charge you Rs.25,000 and of it, Rs.6000 is towards Seva. I have an online link, I will open the link for you, you can login, pay your 6000 there. I will facilitate but I will not charge one rupee. Balance 19,000, you pay to me'. Then the 6000 will be exempted because the payer is logging in directly even though the service provider is the facilitator. My submissions is that the PTOs cannot pass the threshold of being in 'conduct of religious ceremony' and so this exemption is not there"

Justice Khanwilkar: "Do you want to read 'by way of' as 'for' conduct of religious ceremony (in the the relevant clause of the Mega Exemption notification)? Otherwise, 'by way of' can be expansive also to include service provider who arranges everything. As per your interpretation, 'by way of' will have to be read as 'for' in connection with the pilgrims"

ASG: "'By way of' should not be read or substituted as 'in respect of'. Because these contrasting expressions appear in the same notification only...Pilgrimage is such a common thing in all religions in our country that if we extend exemption to tour operators..."

Justice Khanwilkar: "...then all pleasure trips will be marked as pilgrimage to one temple (in lighter vein)"

ASG: "Clause 5A of the notification says 'services by a specific organisation in respect of a religious pilgrimage'. 'By way of' is substituted by 'in respect of' and 'religious ceremony' is substituted by 'pilgrimage'. So this clause is referring to activities which are facilitating the pilgrimage under a bilateral agreement. For 5A to apply, all these 5 elements have to be satisfied- 5A is a Cumulative of 'specified organisation', 'in respect of', 'Religious pilgrimage', 'facilitated by' and 'under a bilateral agreement'. It identifies who is the facilitator, that is the Ministry of external affairs. 'Specific organisation' is defined in the notification- the Kailash Mansarovar committee and the Haj committee. We don't extend this to anybody else because both are under bilateral agreement. The State is undertaking this responsibility"

Justice Khanwilkar: "Under the bilateral agreement, you are permitted to send hundred visitors. You send 70 through this mechanism and 30 through another. So bilateral agreement does not make the distinction"

ASG: "The answer is this- 70 sent on what capacity, 30 sent on what capacity? I could have kept all hundred to myself. I choose to give 30 because private operators also want to do it. I am giving my quota to them. It does not necessarily mean that the status at which I perform will be the status at which they perform. The law makes this distinction. You cannot say that the State cannot be a privileged assessee in indirect tax. There is a nine-judge bench judgment of this Court that State can do sovereign functions, State can do commercial functions. When State performs sovereign functions, it cannot be taxed. When State performs commercial functions, it can be taxed. Here, the State takes the responsibility. The Haj Committee is created under an Act of the Parliament, the entire conspectus of its activities is monitored and finally to be laid before the Parliament. The private tour operator has no such obligations. The law does not prohibit the PTOs from charging more from a customer who is willing to pay more for a more comfortable living"

In his rejoinder submissions, Senior Advocate Arvind Datar, for the petitioners, urged, "If we interpret 'by way of' as only extending the exemption to the person who is performing the religious ceremony, then the entire exemption will become meaningless. The exemption has been given to reduce the burden on the Haj pilgrimage..."

Justice Khanwilkar: "...this provision is religion neutral. It is not only for Haj pilgrimage"

Mr. Datar: "Haj is sui juris. The way it is conducted, it is not like other ceremonies"

Justice Khanwilkar: "You are the service provider- tour operator. You are not providing service by way of conduct of religious ceremony as such"

Mr. Datar: "The ASG is saying HGO is not providing services for conduct of religious ceremony. My submission is that this is wrong because the HGO is a special body governed by the Ministry of minority affairs. The Haji goes to the HGO in India or an HGO in a different country. That HGO is linked to the Tawafa. The Tawafa organisation is part of the Ministry of Saudi Arabia. Money is paid to the Tawafa. The Tawafa then goes to the specific agents and the ceremony is conducted. Service provided by the HGO is a service for the conduct of religious ceremony. You cannot just take a flight and go to Jeddah by yourself. It has to be through the government. I would request your lordships to interpret the notification to say that given the peculiar nature of the Haj ceremony which is covered by the bilateral agreement- the number of pilgrims who can go is controlled, the division between the Haj committee and the HGOs is also decided inter-governmentally- the whole thing is a integrated package. The services by way of religious ceremony will also include HGO"

Justice Khanwilkar: "By this interpretative process, you want to enter into 5A? 5A deals with pilgrimage. If your argument is accepted, it will be that this is the process of pilgrimage conducted by private tour operators to be included in 5 A. If your argument is accepted, the religious ceremony will begin from the time the pilgrim departs from this country. Ultimately, it will come to that. But Ceremony is different from pilgrimage"

Mr. Datar: "I agree that religious ceremony is a subset of pilgrimage. You go on a pilgrimage to perform the religious ceremony. I am only on 5(b) because I am not going through the Haj committee route, I am going through the HGO. I am only on whether the PTOs can claim the benefit of 5(b), because there is a taxable service and I am not in the negative list"