M/s D Pauls Travels and Tours Ltd., is a travel agency, has approached the Delhi High Court challenging the levy of tax on double taxation effect of GST provisions on inter-state supply of services under the newly implemented Goods and Services Tax (GST) regime.
The petitioners strenuously argued before the Court that there is ambiguity in interpretation of certain provisions of the Central Goods and Services Tax Act (CGST) and Integrated Goods and Services Tax Act (IGST). They contended that the provisions are contrary to Articles 14 and 19(1) (g) guaranteed under the Constitution.
A bench of Justices S Muralidhar and Prathiba M Singh had admitted the petition and issued notice to the respondents, Union of India and GST Council etc.
The petitioner has contended that a combined reading of the above two Acts would show that if a travel agency offers to book a service for its customer in other States, it will be liable to pay SGST & CGST in addition to IGST. For instance, if the petitioner were to book a hotel in Goa for its customer in Delhi, in addition to the levy of IGST, the law also allows the Hotel in Goa to charge an independent CGST and SGST.
The petitioners also claimed that the current law prevents them from claiming input tax credit under section 16 of the CGST Act as regards the SGST paid the benefit of input tax credit for SGST charged (under the CGST Act) in a State cannot be claimed by an entity registered in a different State.
In order to be registered within the state, the entity will have to have a place of business within the State.
In order to claim the benefit of input tax credit for SGST paid and avoid this form of double taxation, the petitioner offering inter-state supply of services would be forced to have a place of business in each State and Union Territory. As a consequence, the petitioner points out that travel agencies have begun opening offices indiscriminately in various states, even if only in name in order to circumvent these tax provisions.
They also claimed that the registration requirement as defined above has a discriminatory effect that has no basis in intelligible differentiaor any rational nexus to the object of the new taxation regime. Further, lack of government clarification as to whether SGST or IGST provisions will apply to such transactions has contributed to continuing losses to the petitioner, as various stake holders are left free to interpret the provisions as they will.
Further, it has allowed unjust enrichment for the state and lead to a substantial reduction in the profit margin for the petitioner.
In this context, the petitioner sought for an interpretation or clarification to resolve the anomaly should come from the High Court or from Goods and Services Tax council, named second respondent, under directions of the Court.
The petitioner have prayed that it be recognised, via court direction or government clarification, that entities like itself are entitled to charge their customers tax under the IGST Act and not under the CGST Act and to full input tax credit under IGST Act in relation to the services supplied in another State or Union Territory, without the requirement of being a “registered person” in every such State or Union Territory.
Senior Advocate Anup J Bhambani, Advocates Rajat Arora, Jaypreet Singh and Avinesh Singh were appeared on behalf of the petitioners. The matter will be taken up next on September 18.
Read the full text of the Petition below.
