2017 (12) TMI 640 - HC - GST

High Court orders review of SGST input tax credit denial for hotels outside Delhi, citing service tax rate impact and online booking discrepancies.

The High Court directs the respondents to examine the anomalies raised by the petitioner regarding the denial of input tax credit on SGST for hotels ... Summary order. The Court directed the respondents to examine the petitioner's contentions concerning denial of SGST input tax credit on hotels outside Delhi and related anomalies, to consider whether the issue should be placed before the GST Council, to inform the Court of the treatment accorded to sale of manufactured goods and other services provided across the country, and listed the matter for further hearing on 8th February, 2018. Issues:1. Input tax credit on SGST charged by hotels located outside Delhi.2. Requirement of registration in all States and Union Territories to avail input credit of SGST.3. Impact on effective rate of service tax for hotel rooms.4. Discrepancies in provisions for online bookings through web travel portals.Analysis:1. The petitioner, engaged in booking tours and hotel packages, faces the issue of being unable to avail input tax credit on the SGST charged by hotels located outside Delhi. They assert that not being registered in the State in question results in the denial of input tax credit on SGST, leading to anomalies in the taxation system.2. The petitioner contends that as per the stand of the respondents, registration in all States and Union Territories is necessary to avail input credit of SGST. This requirement is argued to be contrary to the fundamental purpose and objective of the Goods and Services Tax regime, raising concerns about the practical implications and compliance burdens on businesses.3. Concerns are raised regarding the impact on the effective rate of service tax for hotel rooms due to the denial of input tax credit on SGST. The petitioner highlights that the service tax rate could significantly increase, affecting hotel room tariffs in different price slabs, thereby impacting the hospitality industry and consumers.4. Discrepancies in the provisions applicable to online bookings through web travel portals are pointed out, where such platforms are able to avail the input tax credit. This differential treatment raises questions about the uniformity and fairness of the tax system concerning service providers in the tourism and hospitality sector.In light of the above issues, the High Court directs the respondents to conduct a detailed examination of the assertions and anomalies presented by the petitioner. The Court emphasizes the need to assess the treatment of input tax credit on SGST in comparison to the sale of manufactured goods and other services provided by assesses across various states. Additionally, the Court instructs the respondents to consider whether the matter warrants deliberation before the GST Council. The case is scheduled for a further hearing on 8th February 2018.