Tax exemption continuity for tourism units upheld despite KVAT transition and absence of a fresh notification.

A Karnataka tourism unit's 100% tax exemption under an earlier sales tax regime continued for the fixed certificate period after the Karnataka Value Added Tax Act, 2003 came into force. The governing notification and later Government Order preserved incentives already offered and committed, and the subsequent notification confirmed that rescission of the earlier notification would not affect dealers who had invested in setting up new tourism units. A separate KVAT notification was therefore not required because the exemption had already accrued and remained protected. The earlier ruling on whether a tourism unit was an industrial unit was treated as inapposite because the dispute concerned continuation of an existing exemption, not the unit's characterisation.

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Issues: Whether the assessee was entitled to continue the tax exemption granted to a new tourism unit under the earlier sales tax regime after the commencement of the Karnataka Value Added Tax Act, 2003, in the absence of a fresh notification under that Act.

Analysis: The assessee held an exemption certificate granting 100% tax exemption for a fixed eligibility period commencing from 27.02.2003. The earlier Government notification and later Government Order preserved incentives that had already been offered and committed, and the subsequent notification clarified that rescission of the earlier notification would not affect dealers who had invested in establishing new tourism units. The challenge based on the absence of a separate KVAT notification was rejected because the incentive had already accrued and remained protected for the certificate period. The reliance on the earlier decision concerning whether a tourism unit was an industrial unit was held inapposite, as the present dispute turned on continuation of an existing exemption rather than the characterisation of the unit.

Conclusion: The assessee was entitled to the exemption, and the Revenue's challenge failed.

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