A recent ruling by the Tamil Nadu Authority for Advance Ruling (TNAAR) on the taxation of spiritual offerings has started creating waves in the country. The ruling would also see how the institutional monetization is treated under the Indirect Tax Laws.
The applicant, Chelliah Rangaraj, had bid for collection of human hair from Arulmigu Mariamman Temple at Samayapuram. Arulmigu Mariamman Temple is a place of public worship administered by HR & CE Department of Government of Tamil Nadu. The hair offered by devotees at Temple is freely given for religious merit. They are usually left in Temple in baskets. The applicant had agreed to collect hair from Temple and then sell them.
The AAR however saw a lot of difference between a religious offering and commercialization of it.
The applicant approached AAR for a ruling on whether his transaction of collecting human hair from Arulmigu Mariamman Temple at Samayapuram, would attract GST or not.
1. Public Interest vs. Business: Temple is for public worship and is bringing solace to public at large and therefore cannot be said to be for the purpose of furtherance of business or for profit.
2. Tax Immunity of Offerings: As the physical commodity of human hair, which is being collected by the applicant, is an exempted item under GST tariff schedule, the right to collect such commodity, which is ancillary to the above physical commodity, should also attract similar tax immunity.
The TNAAR’s Legal Rationalization
The Authority therefore rejected the application of the applicant and held that the transaction would attract GST as per the Central Goods and Services Tax Act, 2017.
1. The Right to Collect is a “Service”
The Right to Collect is a “Service”- Section 2(102) of the CGST Act defines the term ‘Service’ to mean any activity by a person, acting in his capacity as a service provider, to another person acting in his capacity as a service recipient, for consideration. In the instant case, the Temple for collection of human hair from devotees followed a structure of an auction being conducted and the highest bidder being entered into a contract with the Temple administration for collection of human hair from devotees and for commercial disposal of the collected human hair. The Temple administration were not selling any goods. They were only selling the right of the highest bidder to collect human hair from devotees and to commercially dispose off the same. This right of the highest bidder of collecting human hair from devotees and of commercially disposing off the same is a service provided by the Temple administration to the highest bidder for consideration or for a license fee.
2. The Commercial Unbundling of Religious Activities
Hence the Temple’s activity of disposal of hair of devotees offered in worship to Lord Mariamman is a separate activity and it would not be entitled to tax exemption merely because activity of collection of hair offered by devotees in worship is carried out by a religious or charitable entity. The tax exemption would apply only to activities that are undertaken by the institution in furtherance of objects of the institution and not for any other reason. As explained above, activities of leasing of assets created by Temple, activity of offering of tenders for exploitation of assets created by Temple are all done for purposes of revenue and would be entitled to tax exemption only if the said activities are carried out in furtherance of objects of the institution and not for any other reason.
| Aspect | Taxability & Rate | TNAAR Reasoning / Statutory Context |
| Licence/Auction Fee paid to the Temple | Taxable @ 18% (9% CGST + 9% SGST) | Under Section 2(102) of the CGST Act, 2017, “services” means anything other than goods. By conducting an auction and charging a fee, the temple is transferring a right to provide a specific service for consideration. The TNAAR noted that commercial activities undertaken by a place of worship do not enjoy religious tax immunity. |
| Sale of Human Hair (As a Good) | Exempted | The physical human hair itself remains an exempted good. The tax liability is not on the devotee’s offering or the material asset, but rather on the structured commercial licence granted to exploit it. |
Conclusion
The TNAAR decision will provide needed comfort to the authorities as well as institutions of religion and charity, in making sure that the country gets to realize the correct revenue under GST, when all such institutions are making monies by way of competitive tender for leasing or for sale of their assets.
