Madras HC Reverses GST Demand on Rent-Free Canteen Facility, Orders Reconsideration

The Madras High Court in a ruling set aside the GST demand order issued on rent-free canteen utilities. The court remanded the case for reconsideration since the taxpayer’s submission had not been regarded by the GST department.

The taxpayer, M/s.Erode Medical Centre filed a writ petition contesting the GST demand order based on non-application of mind. The counsel of the applicant, Mr. G. Natarajan, indicated two main defects in the impugned GST demand order.

Firstly, he addressed the GST levy on premises used by a third party for running a canteen. The taxpayer, no rent was collected for the canteen space, as it was provided as an additional facility for hospital visitors. However, this opinion was disregarded, and the GST proposal was confirmed.

Secondly, concerning the alleged non-payment of GST on the medicines sale, it explained that the applicant did not sell any medicines during the assessment period. Instead, these sales are conducted by the EMC Pharmacy (HUF) or EMC Pharmacy, a partnership firm, and remitted the related taxes. Even after the response of the applicant on 08.01.2024 indicating this fact, the order failed to regard it, seeking judicial interference, counsel mentioned.

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The counsel of the respondent furnished that the factual aspects of finding the supplier of medicines might need to be reconsidered. It was noted by the bench of Justice Senthilkumar Ramamoorthy that the claim of the taxpayer that no rent was collected because the space was furnished as an additional facility for hospital visitors.

In the contested GST order such points were not been regarded, asking for reconsideration. Madras High Court noted that the taxpayer furnished prima facie proof representing that the supplies at the time of the pertinent duration were made via either EMC Pharmacy (HUF) or EMC Pharmacy, a partnership firm and that these entities collected and remitted taxes. The affidavit and reply of the taxpayer claim the same. Therefore the order was set aside and the case was remanded for reconsideration.