Ayurvedic Treatment Incidental to Resort Activities: Kerala HC upholds Luxury Tax Liability [Read Order]

In a recent judgment, the Kerala High Court upheld the imposition of luxury tax on Keraleyam Ayurvedic Resort, ruling that the Ayurvedic treatment offered by the resort was only incidental to its main activities as a hospitality service provider.

Keraleyam Ayurvedic Resort, operated by S.D. Pharmacy Pvt. Ltd., had challenged tax and penalty orders issued by the Commercial Tax Officer (Luxury Tax), Alappuzha. The dispute centered around whether the resort qualified as a hospital under the pre-2008 version of the Luxury Tax Act, or whether it should be taxed as a luxury service provider.

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The 2008 amendment had expanded the definition of “hospital” to include Ayurvedic and therapy centers, but the assessments in this case related to periods before the amendment. The assessing officer held that the resort’s primary income came from offering accommodation and recreational services to tourists, with Ayurvedic treatment provided only as an added feature.

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Activities like houseboat cruises, elephant rides, cultural performances, and inclusive room tariffs for meals and entertainment were cited as evidence that the facility functioned mainly as a resort.

The appellant’s counsel argued that it operated a hospital and that accommodation charges were merely incidental to medical treatment. Both the Deputy Commissioner (Appeals) and the Appellate Tribunal rejected this view. The tribunal found that the resort’s services were largely recreational and commercial in nature, and not confined to patient care.

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When the case reached the High Court in writ petitions, the learned Single Judge also found against the petitioner, noting that they had failed to produce financial records proving that their accommodation income was incidental to Ayurvedic treatment. The judge upheld the assessment but reduced the penalty imposed.

On appeal, the Bench comprising Justice Dr. A.K. Jayasankaran Nambiar and Justice Easwaran S., observed that the issue involved findings of fact, which did not warrant interference in an intra-court appeal. The bench also referred to the promotional material submitted by the resort, which pointed out tourist-focused activities rather than healthcare services.

The court held that the Ayurvedic treatment was not the principal service offered so the resort could not claim exemption from luxury tax. The court dismissed the writ appeals

To Read the full text of the Order CLICK HERE

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