Kerala High Court Declares Ayurvedic Centre a 'Hospital' for Tax Purposes

Escapade Resorts Pvt. Ltd. Wins Tax Dispute, Avoids Luxury Tax Imposed on Hotels

In a significant judgment delivered on November 18, 2025, the Kerala High Court ruled in favor of M/s. Escapade Resorts Pvt. Ltd., a company providing Ayurvedic treatments, declaring it a 'hospital' rather than a 'hotel' under the Kerala Tax on Luxuries Act, 1976. This decision effectively exempts the company from luxury taxes imposed on hotels for the period from 2004-2005 to 2007-2008.

The writ petition was filed by Escapade Resorts Pvt. Ltd., which operates out of the leased Kollengode Palace, offering therapeutic Ayurvedic treatments. The Commercial Tax Officer had previously classified their operations as those of a 'hotel' and levied a 15% luxury tax on room rent and treatment charges. The company contested this classification, arguing that their services exclusively catered to individuals undergoing treatment, with no typical hotel amenities such as restaurants or swimming pools.

The court's decision hinged on the nature of services provided by the company, which were deemed more aligned with those of a hospital. The judgment cited a related Division Bench decision from 2020, which had similarly categorized the establishment as a hospital for subsequent years post the 2008 amendment to the Luxury Tax Act.

Justice Harisankar V. Menon, leading the bench, noted that the company's services, including Ayurvedic treatment programs, were oriented towards health improvement rather than conventional hospitality. The court emphasized that the treatment charges significantly exceeded room rent, a factor that supported the classification as a hospital.

The court's ruling not only sets aside the previous tax assessment but also directs the Commercial Tax Officer to re-evaluate the company's tax liability, treating it as a hospital for the disputed period.

This judgment brings clarity to the classification of Ayurvedic centers in Kerala, potentially impacting similar establishments facing luxury tax assessments. The decision underscores the importance of assessing the primary nature of services provided when determining tax liabilities under the Kerala Tax on Luxuries Act, 1976.

Bottom Line:

A private limited company offering Ayurvedic treatments in a leased property is to be considered a 'hospital' and not a 'hotel' for the purpose of the Kerala Tax on Luxuries Act, 1976, for periods prior to the 2008 amendment.

Statutory provision(s): Kerala Tax on Luxuries Act, 1976

M/s.Escapade Resorts Pvt. Ltd. v. Commercial Tax Officer (WC & LT), (Kerala)(DB) : Law Finder Doc Id # 2817607