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GST on Sex Workers?

JUNE 01, 2022

By Vijay Kumar

IN a recent judgement, the Supreme Court observed,

Human rights jurisprudence in India has acquired a constitutional status and sweep, owing to the full potential breathed by this Court into Articles 14, 19 and 21 of the Constitution of India since Maneka Gandhi v. Union of India. The constitutional regard for human decency and dignity has been explicitly incorporated into Article 21 by this Court. While expounding on the scope of the right to life under Article 21, this Court in Francis Coralie Mullin v. Administrator, Union Territory of Delhi extended the meaning of the right to life beyond the protection of limb or faculty to include the right to live with human dignity and all that goes along with it, namely, the bare necessities of life such as adequate nutrition, clothing and shelter and also the right to carry on such functions and activities as constitute the bare minimum expression of the human-self. Needless to say, this basic protection of human decency and dignity extends to sex workers and their children, who, bearing the brunt of social stigma attached to their work, are removed to the fringes of the society, deprived of their right to live with dignity and opportunities to provide the same to their children.

Pursuant to an order of the Supreme Court on 19.07.2011, a Panel was constituted with the following terms of reference:

(1) Prevention of trafficking,

(2) Rehabilitation of sex workers who wish to leave sex work, and

(3) Conditions conducive for sex workers who wish to continue working as sex workers with dignity.

The Panel submitted a comprehensive report. When the matter was listed in the year 2016, the Supreme Court was informed that the recommendations made by the panel were considered by the Government of India and a draft legislation was published incorporating the recommendations made by the panel. Thereafter, periodically adjournments were taken by the Union of India on the ground that the Bill is on the anvil.

As the legislation has not been made till date even though the recommendations were made by the Panel in the year 2016 and the said recommendations have to be implemented, the Supreme Court exercising the powers conferred under Article 142 of the Constitution of India, issued certain directions which will hold the field till a legislation is made by the Union of India.

It was observed that:

(i) Sex workers are entitled to equal protection of the law. Criminal law must apply equally in all cases, on the basis of 'age' and 'consent'. When it is clear that the sex worker is an adult and is participating with consent, the police must refrain from interfering or taking any criminal action.

(ii) Any sex worker who is a victim of sexual assault should be provided with all facilities available to a survivor of sexual assault.

(iii) Whenever there is a raid on any brothel, since voluntary sex work is not illegal and only running the brothel is unlawful, the sex workers concerned should not be arrested or penalised or harassed or victimised.

(iv) The State Governments may be directed to do a survey of all ITPA Protective Homes so that cases of adult women, who are detained against their will can be reviewed and processed for release in a time-bound manner.

(v) It has been noticed that the attitude of the police to sex workers is often brutal and violent. It is as if they are a class whose rights are not recognised. The police and other law enforcement agencies should be sensitised to the rights of sex workers who also enjoy all basic human rights and other rights guaranteed in the Constitution to all citizens. Police should treat all sex workers with dignity and should not abuse them, both verbally and physically, subject them to violence or coerce them into any sexual activity.

(vi) The Press Council of India should be urged to issue appropriate guidelines for the media to take utmost care not to reveal the identities of sex workers, during arrest, raid and rescue operations, whether as victims or accused and not to publish or telecast any photos that would result in disclosure of such identities.

(vii) Measures that sex workers employ for their health and safety (e.g., use of condoms, etc.) must neither be construed as offences nor seen as evidence of commission of an offence.

(viii) The Central Government and the State Governments must involve the sex workers and/or their representatives in all decision-making processes, including planning, designing and implementing any policy or programme for the sex workers or formulating any change/reform in the laws relating to sex work.

(ix) The Central Government and the State Governments, through National Legal Services Authority, State Legal Services Authority and District Legal Services Authority, should carry out workshops for educating the sex workers about their rights vis-a-vis the legality of sex work, rights and obligations of the police and what is permitted/prohibited under the law. Sex workers can also be informed as to how they can get access to the judicial system to enforce their rights and prevent unnecessary harassment at the hands of traffickers or police.

The Supreme Court observed, "It need not be gainsaid that notwithstanding the profession, every individual in this country has a right to a dignified life under Article 21 of the Constitution of India."

Now that it is clear that prostitution is a profession and is not per se illegal, can GST be levied on prostitutes?

It was reported that in 2007, an organisation of sex workers in west Bengal requested the government to tax them. They told the government, "Even if we collect one rupee from each client it would boost the exchequer; Let the government collect taxes legally, as prostitutes in any case pay the police hefty amounts to get away."

Sex workers say they are harassed by police and picked up from brothels, hotels and nightclubs and jailed. They often have to pay bribes to officers to continue working.

But a Police Officer said, "Tomorrow, criminals will say, we will pay taxes so don't catch us."

In 2009, the Supreme Court asked the government, "When you say it is the world's oldest profession and when you are not able to curb it by laws, why don't you legalise it? You can then monitor the trade, rehabilitate, and provide medical aid to those involved in the trade."

Now perhaps GST can be levied, and prostitutes will be asked to issue invoices when they receive payments and may be even subject to Audit.

Let us hope there would be no issues on valuation of services, like what will they do where the consideration received is not wholly or partly consisting of money? What would be the status if a foreign prostitute who has no establishment in India comes to India on business? Will the client be liable to pay the tax? And what would be the position if an Indian prostitute does business abroad? Will it be export of services? Will the expenditure of hiring a prostitute for a client be allowed as business expenditure under the Income Tax Act? [Extracts From DDT 1255 - 10.12.2009

newspaper reported today that Income Tax sleuths raided Kolkata's red-light areas and seized over a Crore of rupees in cash. 

How can the poor prostitutes pay income tax when their profession is not recognised as legal? Of course even illegal income is taxable. But what has the Welfare State done for these unfortunate prostitutes; has the State ever wondered what happens to them when they are too old to carry out their profession all the States men who enjoyed their services will not bother to lend a helping hand. The State should try to do something for their welfare before raiding them for evading income tax. [Extracted from DDT 2328 - 04.04.2014

Maybe issues like 'whether input credit would be allowed on condoms,' would crop up.

A Netizen imagined this issue [The intention is only to just laugh it off and not to belittle any person or institution.]:

Issue: Whether tax on condoms is eligible for credit as input:

Revenue: The input is not absolutely necessary for supplying the output service. The service can also be performed without the use of the input. Therefore, it fails the test of essentiality and hence cannot be treated as input.

Taxpayer: Though it is not disputed that the output service can be performed without the use of the input, it is required to shield the clients from possible transmission of diseases. Not only the clients, but in some cases, the service provider is also shielded. It is used or intended to be used by the supplier in the course or furtherance of business. Hence it is eligible for input credit.

COURT: The facts are not in dispute. Though the output service can be provided without the use of the inputs, it cannot take the item outside the definition of input. It is certainly used or intended to be used by a supplier in the course or furtherance of business. We are convinced that the item is eligible for credit.

DGGI case of misuse of Credit: On detailed investigations conducted, it was found that the taxpayer has shown only one thousand clients in the records whereas they have availed credit on 1,500 items; thus availed credit on 500 items which are not used for output service but diverted for other purposes.

CAG: In the Commissionerates of…, the Audit observed that some of the clients have disappeared in the darkness of night without paying for the service, which was finally written off. Therefore, the assessee is not entitled for corresponding credit on inputs. The department's reply is awaited.


KSWN Y, Consultants: The gender of a human being is determined by the Chromosomes, X and Y. If it is XX, it is a female and if it is XY, it is a male. (Researchers are still working on the transgenders). Thus, the whole world is divided into two sexes, Male and Female. With the globalization of world economy, certain new benefits are bound to accrue. When a falling apple has led to the discovery of gravity, eating it has resulted in attraction between the opposite sexes. Now, can the Government levy GST if such attraction has some professionalism in it? The Supreme Court in Chartered Accountants Association Vs UOI, upheld the constitutional validity of imposing service tax on professionals.

After 40 such pages ...

The client is advised to buy the inputs not bearing a brand name from small manufacturers so that the dispute on input credit can be avoided.

Please find enclosed the bill for Rs 1,00,000/- towards PROFESSIONAL charges, service tax (GST) extra.

Tailspark: Condoms are classified under heading 4014 and attract NIL rate of duty.

[Extract from - Laughter - The best medicine - DDT 1291 - 23.02.2010

Maybe, the government should immediately clarify the position with regard to GST on prostitution, lest we should have friendly officers swarming the place with summons to prostitutes to appear during the office hours, when they (the prostitutes) are supposed to sleep and rest.

Until Next week

Sub: Another unenforceable judgment

It looks like the Supreme Court is wading into another mine field. It will deliver another judgment which cannot be enforced. Recall what happened to the judgment in Sabarimala case. It is worse than a dead letter.

Posted by Gururaj B N
Sub: What is definition of sex worker

Sex worker may be of any gender. So who is service provider and who is service receiver ? That is also the debatable question.

Posted by K Lal