Licence to collect human hair is a taxable supply of service; exemption for hair goods does not cover the licence fee.

AAR Tamil Nadu held that a temple's grant of a licence to the successful bidder to enter its premises and collect human hair for consideration is a distinct commercial arrangement and a taxable supply of service under GST. The temple was not supplying the hair itself; it was transferring a right to collect it, which falls within the statutory concept of supply when made for consideration in the course or furtherance of business. The exemption for human hair was confined to the goods themselves and did not extend to the licence or auction amount charged for permitting collection. Accordingly, the licence consideration was held taxable.

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Issues: (i) Whether the amount collected by the temple for issuing a licence to collect human hair from the temple premises falls within the scope of supply under the GST law; (ii) whether the exemption for human hair extends to the auction or licence amount charged by the temple for permitting collection of the hair.

Issue (i): Whether the amount collected by the temple for issuing a licence to collect human hair from the temple premises falls within the scope of supply under the GST law.

Analysis: The activity undertaken by the temple was not merely an act connected with worship, but the grant of a licence to the successful bidder to enter the premises and collect tonsured hair. The Authority treated the transaction as a distinct commercial arrangement for consideration, and held that a licence is included within the statutory concept of supply when made for consideration in the course or furtherance of business. It further held that the temple was not itself supplying the hair, but was transferring a right to collect it through a taxable service falling under the relevant service classification.

Conclusion: Yes. The licence amount collected by the temple towards collection of human hair is a supply of service and falls within the scope of supply under the GST law.

Issue (ii): Whether the exemption for human hair extends to the auction or licence amount charged by the temple for permitting collection of the hair.

Analysis: The exemption relied upon was confined to the supply of human hair as goods. The Authority distinguished the present transaction as a service of granting a licence to collect hair from the temple premises, and not the exempt supply of the hair itself. It therefore held that the exemption notification for human hair did not cover the licence consideration charged by the temple.

Conclusion: No. The amount charged for the licence to collect human hair is not exempt and is taxable.

Final Conclusion: The ruling accepts that the temple's licence arrangement is a taxable supply of service, while denying exemption for the licence amount on the footing that the exemption applies only to human hair as goods.

Ratio Decidendi: A grant of licence for consideration to collect goods from temple premises is a taxable supply of service when it is a distinct commercial transaction, and an exemption applicable to the goods themselves does not extend to the consideration charged for the licence to collect them.

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