Adlabs drag taxman to court over extension of GST incentives due to Covid and lockdowns

The company in a writ petition filed with the court said that its water and theme parks remained shut during 2020 and 2021 due to forced lockdown by the government and this period should be excluded from the tax holiday and the exemption period should be extended by the number of lockdown days.

Legal experts say that the court’s ruling in the matter will give clarity to several other companies that are also seeking extension to certain government schemes.

“GST is a great symbol of cooperative federalism and both the central government and the state government will have to come up together to honour the incentives promised to the business entities prior to implementation of GST,” said Abhishek A Rastogi, partner at law firm Khaitan.

The court has asked the government and the tax department to respond to the writ petition.

“While the state government may have fulfilled part of its duty, the central government will have to either give the remaining part of the share or recommend an extension of the eligibility period”, said Rastogi, who is representing Adlabs.

The company in its writ petition sought has sought that it be granted an “up-front exemption from 100% of GST leviable on sale of the goods to the Theme Park and Water Park adopted by the petitioner at Khalapur and also seeks refund of the GST already paid by the petitioner till date.”

This is not the first time theatres and multiplexes have approached the courts over indirect tax due to Covid pandemic and lockdowns.

Many multiplexes had approached courts after various state governments that had extended tax and other sops to the industry to get investments in their respective states are now seeking them back, citing breach of contract.

States like Uttar Pradesh, Maharashtra, Haryana, West Bengal, Tamil Nadu and Karnataka had dished out these sops, which included a waiver of entertainment tax for up to five years.

Tax experts say that the incentives with respect to entertainment tax were given on the condition that the multiplex theatres would continue for a period of five years from the end of the exemption period. However, due to Covid-19 induced lockdown, many multiplexes could complete five years of operations.

Though they have shown the intent to continue the businesses once the environment is conducive to exhibit movies, some of the state governments have now started the recovery process and even issued notices in some instances.