The Jammu & Kashmir & Ladakh High Court (Srinagar Bench) ruled that the hotelier (petitioner) is liable to pay GST on the rental income which he is receiving from the Department of Home in respect of the hotel accommodation hired by the Department of Home. The petitioner, therefore, shall be legally bound to seek appropriate registration under the CGST/Jammu and Kashmir GST Act and deposit the service tax at the prescribed rate with the GST authorities. At the same time, the Court also held that the Department of Home, Government of Jammu and Kashmir, shall be liable to pay the prescribed rate of GST in addition to the rent payable to the petitioner per room per day as determined by the Government from time to time.
Finding that despite repeated requests and representations made by the hoteliers similarly situated to the petitioner, the rent has not been revised since 2013, and also the rental income received by the petitioner and other similarly situated hoteliers is now exigible to GST, the Division Bench comprising Justice Sanjeev Kumar and Justice Sanjay Parihar observed that that it is the liability of the Department of Home to reimburse such amount.
Speaking for the Bench, Justice Sanjeev Kumar pointed that the invoices of rent will have the rental fixed by the Government on the recommendation of the Rent Assessment Committee plus the GST as applicable, and this amount of GST to be collected by the petitioner from the Department of Home is thereafter required to be deposited with the GST authorities to fulfil the legal obligation of paying the GST on the services supplied.
In this case, the Petitioner, who is the owner of a hotel premises, had rented it out to the Police Department of the Government of Jammu and Kashmir for accommodation of the Central Security Forces engaged in maintaining law & order in the valley. Since, based on the recommendations of the Rent Assessment Committee, the petitioner had been receiving rent at the rate of Rs. 300/- per day per room from the year 2013, all the hoteliers similarly situated with the petitioner sought enhancement of the hiring charges, but in vain. Essentially, when the GST Authorities raised a demand under the GST Act, 2017, the Petitioner accepted his liability to pay the GST on the per day rental income derived by hiring hotel rooms to the Government, however claimed that the GST element, which is payable by the petitioner, must be reimbursed/paid in addition to the fixed rent by the Government. The Respondent State however argued that the hotel accommodation having declared tariff below Rs. 1000/- per day per unit has been made taxable @ 12% and the liability to charge GST from the tenant while issuing invoice for supplying taxable services is on the petitioner and it is the petitioner who is under a legal obligation to deposit the tax with the Government.
When the matter reached the High Court, it was observed that ordinarily, the GST element must be included in the rent, and there should be no dispute that the liability to collect the GST on the services supplied is on the supplier of the services and shall arise at the time of supply of goods and services as determined in accordance with Section 12 of the Jammu and Kashmir GST Act.
The High Court also noted that the Tariff per unit per day in respect of the hotel accommodation of the petitioner has been fixed by the Government on the recommendations made by the Rent Assessment Committee, much prior to the year 2017, when the GST regime was not implemented. It is, thus, obvious that the levy of GST was not contemplated while fixing the tariff by the Rent Assessment Committee. Accordingly, the Court found that with the implementation of the GST regime and enforcement of the Central CGST Act and Jammu and Kashmir GST Act, the income derived by the petitioner and other hoteliers, who had rented out their hotel accommodation to the Government for accommodating its security forces, is now made taxable @ 12%.
The High Court therefore pointed out that it is the right time for the Department of Home to constitute a proper Rent Assessment Committee to revise the rental in respect of the hotel accommodations it has taken on rent for the last several years. Accordingly, the Court directed the Department of Home to start paying the GST in addition to the rental payable to the petitioner w.e.f. August 2025, and the petitioner to immediately seek its registration under the GST Act to enable it to collect the GST from the Department of Home and deposit the same with the GST Authorities.
Appearances:
Advocates Manzoor A. Dar and Muzamil Jabeen, for the Petitioner
Senior AAG Mohsin Qadri and Advocate Maha Majeed, for the Respondent