GST Applicable on Commercial Temple Hair Collection Licences, Holds AAR

The Tamil Nadu Authority for Advance Ruling (AAR) has held that the commercial right granted to collect human hair from temple tonsure sheds through an e-tender process constitutes a taxable supply of services under the GST law and cannot be treated as an exempt religious activity.

The Bench comprising Shri C. Thiyagarajan, I.R.S. (Member-CGST) and Shri B. Suseel Kumar (Member-SGST) clarified that while the act of devotees offering hair to the deity as part of religious practice is exempt from GST, the subsequent commercial exploitation of that hair by granting collection rights to third parties is an independent business transaction liable to tax.

The Authority observed that, “The religious activity concludes once the devotee offers the hair,” and any later assignment of rights by the temple for collection and removal of such hair through auction or tender is purely commercial in nature.

The applicant, Shri Rangaraj, had entered into a contractual arrangement with a temple administration in Tamil Nadu after emerging as the successful bidder in an e-tender floated by the temple authorities. Under the terms of the licence, the applicant was granted exclusive rights to collect, accumulate, pack and remove human hair from the tonsure sheds located within the temple premises.

As per the tender conditions, the applicant was also allotted around 1,000 square feet of space inside the tonsure mandapam to temporarily store and process the collected hair. The agreement further required the licensee to clear the accumulated hair within three days to maintain hygiene and cleanliness within the temple premises.

Before the Authority, the applicant contended that the activity was intrinsically connected to the temple’s religious function of tonsuring devotees and therefore should enjoy the same exemption available to religious institutions under Notification No. 12/2017-Central Tax (Rate). However, the AAR rejected the contention and held that the exemption available to religious activities cannot be extended to downstream commercial arrangements entered into by the temple for monetising the collected hair.

The Authority noted that the tender conditions clearly established a commercial contract between the temple administration and the applicant. The objective of the arrangement was not religious performance but commercial collection and disposal of human hair for further use in the hair industry.

The Bench further observed that the licence granted through the e-tender amounted to an assignment of a right for consideration and squarely fell within the scope of “supply” under Section 7 of the CGST Act, 2017. Consequently, GST was held payable on the licence fee charged by the temple administration.

Thus, the Tamil Nadu AAR ruled that the right to collect human hair from temple tonsure sheds under a commercial licence is a taxable supply of services and does not qualify for the exemption available to religious activities.

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