Mahindra Holidays Gets ₹363 Cr GST Demand Notice: What It Means for the Hospitality Sector
The hospitality industry is once again in the tax spotlight. Mahindra Holidays & Resorts India Ltd. has received a GST demand notice worth ₹362.97 crore from the Directorate General of GST Intelligence (DGGI). The notice alleges short payment of tax and misclassification of services related to their timeshare products.
This blog simplifies what this GST demand notice means, what the law says about such cases, and the broader impact on bundled vacation services.
Why Did Mahindra Holidays Get a GST Demand Notice?
As per the company’s stock exchange filing dated June 29, 2025, the Directorate General of GST Intelligence (Chennai Zonal Unit) issued the notice after observing irregularities in GST payments between July 2017 and March 2022.
Key Allegations:
- Wrong classification of services: Mahindra Holidays treated its offerings as “construction of complex service” or partly exempt services.
- Short payment of GST: On the timeshare membership fees collected over multiple years.
- Denial of input tax credit (ITC): Improper availing or utilisation of ITC during the said period.
🔎 Legal Reference: GST is governed under the CGST Act, 2017. Misclassification falls under Section 73 or 74, leading to interest and penalty in addition to tax dues.
Understanding Timeshare Under GST
Timeshare products offer customers access to vacation resorts for a specified period every year, typically for 10–25 years.
GST Complexity in Timeshare:
| Component | Taxable? | GST Treatment |
|---|---|---|
| Membership Fee (lump sum) | Yes | Considered supply of service |
| Annual Maintenance Charges | Yes | Taxable at applicable rate |
| Room Occupancy/Accommodation | Yes | May vary if bundled or separately billed |
Challenge: Timeshare is a composite supply involving:
- Accommodation
- Holiday planning
- Membership privileges
This creates confusion over correct HSN classification and applicable GST rate (12%, 18%, or 28%).
CBIC Clarification on Bundled Services
In various clarifications and AAR rulings, bundled hospitality services like club memberships, resort stays, and leisure packages have been held as composite supplies, where the principal supply dictates the GST rate.
Relevant CBIC Circulars:
- Circular No. 47/21/2018-GST: Clarifies composite vs. mixed supply.
- Section 8 of CGST Act: Composite supply taxed at the rate applicable to the principal supply.
What Happens After a GST Demand Notice?
Once a GST demand notice is issued:
- Reply within stipulated time (usually 30 days under Rule 142(1A) of CGST Rules).
- Option to pay tax with interest and reduced penalty before adjudication.
- File representation or seek legal remedy (appeal or writ, if needed).
📘 Expert View:
“Timeshare models need GST structuring from day one. Ignoring composite supply rules can lead to hefty demands later.”
— CA Ramesh K, Indirect Tax Consultant
Previous Similar Cases
- Club Mahindra Kerala AAR (2019): Held timeshare membership as supply of service liable to GST.
- Amway India (2023): Faced similar issue with classification of bundled services.
What Small Businesses Can Learn
- Review composite vs. mixed supply classification.
- Ensure proper GST rate mapping when bundling services.
- Reconcile ITC with actual usage and documentation.
Summary
Mahindra Holidays received a ₹363 Cr GST demand notice over misclassified timeshare services. DGGI alleges tax shortfall from July 2017–March 2022. Composite supply rules and CBIC clarifications may impact GST treatment in bundled hospitality offerings.
FAQs on GST Demand Notice
Q1. What is a GST demand notice?
A notice issued by GST authorities for short payment, non-payment, or wrong classification of taxes.
Q2. Can companies challenge a GST demand?
Yes, by filing a reply or appealing to higher authorities like GSTAT or High Courts.
Q3. What is the time limit for a GST demand notice?
Normally 3 years under Section 73; 5 years in fraud/suppression cases under Section 74.