Mushtaq Ahmed Bhat vs. Union Territorry Of J And K And Ors. (Home / Excise And Taxation)

Held

The Court held that rental income from hotel accommodation is a supply of service taxable under the GST regime. Question 1 was answered in the affirmative, stating that with the implementation of GST and notifications like No. 04 of 2022-Central Tax (Rate) and SO 390 of 2022, rental income from hotel accommodation, even with a declared tariff below Rs. 1000/- per unit per day, is taxable at 12%. The Court reasoned that Section 7 of the J&K GST Act, 2017, has an inclusive definition of 'supply' and renting commercial property is a taxable service. Regarding Question 2, the Court held that while the petitioner is liable to pay GST, the Department of Home is obligated to pay the prescribed rate of GST in addition to the rent. The Court directed the petitioner to obtain GST registration and deposit the tax, and the Department of Home to pay the GST in addition to the rent from August 2025. The Court also recommended the Department of Home to revise the rental rates. The petitioner was directed to complete registration by July 31, 2025.

Facts

The petitioner, owner of Hotel Boulevard, rents out hotel premises to the Jammu and Kashmir Police Department for accommodating Central Security Forces. The rent was fixed at Rs. 300/- per day per room in 2013, with no provision for enhancement. Following a previous High Court order directing a revision of rent, the petitioner's grievance is that the Government is reluctant to revise the rent while GST authorities have raised a demand for GST on the rental income. The petitioner does not dispute GST liability but seeks reimbursement from the Government in addition to the fixed rent. The GST authorities contend that accommodation services are taxable under the GST Act, and the petitioner is liable to collect and deposit the tax.

Key Issues

1. Whether the rental income received by a landlord from a tenant for accommodation in a hotel (commercial accommodation) based on the declared tariff per unit per day is exigible to GST? 2. If the answer to question 1 is affirmative, whether the Department of Home (the tenant) is under a legal obligation to disburse the agreed rental along with GST to the landlord? Petitioner's arguments: The rental tariff was fixed in 2013 before the GST regime was implemented, and thus, GST was not contemplated. The Government, as the tenant, should pay the GST in addition to the fixed rent. Revenue/State's arguments: The GST Act, 2017, and subsequent notifications have made hotel accommodation taxable. Section 31(2) of the J&K GST Act, 2017, places the liability to charge GST from the tenant and deposit it with the government on the petitioner (supplier of service).