Facts of the Case

The petitioner, Hamsa Koya K.T., was granted a licence pursuant to a tender by the Kerala Transport Development Finance Corporation Ltd. (KTDFC), a State Government undertaking, for operating pay-and-use toilet facilities at the KSRTC bus terminal cum shopping complex, Angamaly, under an agreement dated 05.04.2019. The licence, valid for one year, carried a licence fee of Rs.3,76,200/-, and the agreement itself provided that the petitioner would additionally pay 18% GST (9% CGST + 9% SGST) on this amount. The petitioner deposited part of the licence fee but did not pay the GST component, leading the third respondent to issue a notice dated 18.01.2020 directing payment of GST at 18% on the licence fee. The petitioner challenged this notice before the High Court of Kerala at Ernakulam.

Issues Involved

  1. Whether the GST exemption notifications for services by way of public conveniences (bathrooms, washrooms, lavatories, urinals and toilets) covered the licence fee paid by an operator to the licensor for the right to run such facilities.
  2. Whether the demand of GST on the licence fee amounted to taxing an exempt public-convenience service, or a separate taxable supply.

Petitioner's Arguments

  • Central and State Government notifications dated 28.06.2017 and 30.06.2017 respectively exempt, under heading 9994, services by way of public conveniences such as bathrooms, washrooms, lavatories, urinals and toilets from GST.
  • Since the petitioner was providing exactly such a public-convenience service, the notice demanding GST on the licence fee of Rs.3,76,200/- was without jurisdiction and contrary to the exemption notifications.

Respondent's Arguments

  • No tax was being levied on the charges collected by the petitioner from the general public for actual use of the toilet facilities; those user charges remained exempt.
  • The 18% GST was instead demanded on the licence amount payable by the petitioner to KTDFC under the agreement, which is consideration for a supply of service covered under the scope of supply in Section 7(1A) of the GST Act, and the licence fee itself is not exempted by the notifications relied upon.

Court Order/Findings

  • The Court found substance in the Government Pleader's submission, holding that the demand of tax was not on the charges collected by the petitioner from the public for use of the toilet facilities, but on the consideration paid by the petitioner to KTDFC as licence fee for taking the facility on licence.
  • The licence fee for operating the facility is a separate supply of service between the petitioner and KTDFC, distinguishable from the exempt public-convenience service rendered by the petitioner to end users, and therefore falls outside the scope of the public-convenience exemption notifications.
  • Finding no substance in the petitioner's contention, the Court dismissed the writ petition, upholding the demand for GST on the licence fee.

Important Clarification

A GST exemption granted for a specific category of public-facing service (such as public conveniences) does not automatically extend upstream to a separate business-to-business transaction, such as a licence fee paid by an operator to the entity granting the right to run that service. The two are distinct supplies for GST purposes: the exempt service to the end user, and the taxable supply of the licence/right to operate between the licensor and licensee under Section 7(1A) of the GST Act.

Sections Involved

  • Section 7(1A), Central/Kerala Goods and Services Tax Act, 2017 — clarifies activities to be treated as supply of goods or services, relevant to characterising the licence arrangement as a taxable supply of service.
  • Notifications dated 28.06.2017 (Central) and 30.06.2017 (State), heading 9994 — exempt services by way of public conveniences such as bathrooms, washrooms, lavatories, urinals and toilets from GST.

Decision – In Favour of

The writ petition was dismissed, in favour of the Department. The Court held that the GST demand on the licence fee paid by the petitioner to KTDFC was validly levied under Section 7(1A) as a taxable supply of service, entirely distinct from the public-convenience service exempted by the relied-upon notifications, which cover only the charges collected from end users of the toilet facilities.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: WP(C) No. 16056 of 2020
  • CNR: Not available
  • Coram: Hon'ble Mr. Justice Dinesh Kumar Singh
  • Decision Date: 2023-11-10
  • Disposal Nature: Dismissed

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