Tax Evasion in Ayurvedic Spas: Kerala State GST Dept unearths Rs. 2 Cr Evasion in Munnar and Anachal

Ayurvedic Spas in Kerala are under the Goods and Services Tax Department’s Scanner for alleged Evasion

The Kerala State Goods and Service Tax ( GST ) department has detected tax evasion by Ayurvedic spas operating in Idukki district. Preliminary inspections at spas in Kumily, Munnar and Anachal unearthed Goods and Services Tax evasions to the tune of ₹2 crore, the department said in a statement on Friday. The inspections were led by Rararaj, Deputy Commissioner ( Intelligence ), Idukki, State GST department. Intelligence and enforcement units of the department based in Ernakulam and Idukki districts participated in the inspections. From a goods and services tax ( GST ) perspective, this structured vacation is generally treated similarly to a hotel stay, resulting in an approximate 18% levy on the final bill, depending on the room tariff. Recently, the Gujarat bench of the GST Authority for Advance Rulings ( AAR ) denied Nimba Nature Cure Village ( a unit of Oswal Industries ) a tax exemption, ruling that its services did not qualify as “health care services by a clinical establishment.” This decision adds to the existing divergent rulings on whether a naturopathy resort is eligible for GST exemption. Conflicting rulings lead to confusion and go against the objective of providing certainty. While the views of one advance ruling authority are not binding on another, judicial discipline would suggest at least detailed reasoning should be provided for that, as per professional opinion. Nimba Nature Cure Village, reputed to be one of India’s largest naturopathy centres, approached the AAR claiming it offers wellness facilities like naturopathy, yoga, ayurveda, meditation, and physiotherapy to treat a range of ailments from lifestyle disorders to respiratory problems. The resort argued that it qualifies as a clinical establishment and should be eligible for exemption under “health care services” as per Entry 74 of Notification 12/2017. The AAR, however, noted that the services provided were composite, comprising accommodation, food, and therapy, with no option for guests to avail of therapy without accommodation. Therefore, the “accommodation service” was deemed the principal supply, and the applicable GST rates for accommodation were applied. Interestingly, in January 2019, the Goa bench of the GST-AAR ruled in favour of Devaaya Ayurveda & Nature Cure Centre, recognizing it as a clinical establishment offering health care services and thus entitled to GST exemption. This discrepancy highlights the inconsistent interpretations of what qualifies for tax exemption within the sector. A government official, while not delving into the specifics of the recent ruling, mentioned that applicants are free to appeal. “Each state also has an appellate AAR. In certain cases of conflicting rulings, the Central Board of Indirect Taxes and Customs steps in with a clarification,” he explained.

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