2018 (5) TMI 647 – AUTHORITY FOR ADVANCE RULINGS, MAHARASHTRA – 2018 (13) G. S. T. L. 449 (A. A. R. – GST) – Levy of GST – reinstatement charges paid to Municipal Authorities – to carry out the excavation of roads for laying, repair and maintenance of electric supply lines. – activity related to sovereign function or not – It has been contended that the service falls under entry 4 of Notification No. 12/2017 -Central/State Tax (Rate) dated 28.06.2017 – Whether reinstatement charges paid to Municipal Authorities would be liable to GST? – Held that: – There is specific entry in N/N. 12/2017-Central/State Tax (Rate) dated 28.06.2017 – from Chapter 99, it is very clear that if any services, including the three services excluded in clauses (a) to (c) of the above entry, are provided by the Government or local authority to any business entity, they would not be eligible for any exemption under GST – the applicant has made a whole lot of arguments to hold that the recovering of charges for t
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ding services such as gas, telephone, electricity, etc. The Guidelines for Trenching activity-2015 [No:AMC/ES/7725/11 Dated 18.12.2014 – policy guidelines for granting trench excavation permissions to underground service provider Utility agencies and Municipal agencies & the reinstatement of trenches] as provided by the applicant state that in addition to the regular RI charges, access charges for right of way will be recovered by MCGM from all utilities which lay underground services below MCGM roads – This statement helps to understand the position as respects MCGM [Municipal Corporation of Greater Mumbai]. That these charges would be exigible to GST is not doubtful even to the applicant and we agree with the same.
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To determine whether it is a composite supply by Municipal Authorities, the available information is insufficient as the question posed is in respect of Municipal authorities in general and not any specific Municipal Authority with complete details and therefore is n
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imilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act /MGST Act would be mentioned as being under the GST Act 02 FACTS AND CONTENTION – AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- 1 – STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON ANNEXURE I- STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS (S) ON WHICH THE ADVANCE RULING REQUIRED 2. M/s. Reliance infrastructure limited ( the Applicant") is inter alia engaged in the business of generation, transmission and distribution of electricity and is registered under Goods and Service Tax Act ( GST ) bearing Registration No. 27AACCR7446Q1ZM. 3. The Applicant has obtained a license under Section 14 of the Central Electricity Act, 2003 ( Electricity Act ) to distribute e
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ion system in his area of supply and to supply uninterrupted electricity to his consumers. Further, in terms of Section 67 of the Electricity Act, every licensee may, from time to time but subject to the terms and conditions of his license, within his area of supply lay down or place electric supply lines and carry out following works: i) to open and break up the soil and pavement of any street, railway or tramway, ii) to open and break up any sewer, drain or tunnel in or under any street, railway or tramway; iii) to alter the position of any line or works or pipes, other than a main sewer pipe; iv) to lay down and place electric lines, electrical plant and other works; v) to repair, alter or remove the same; vi) to do all other acts necessary for supply of electricity. 6. Section 67 of the Electricity Act confers power on the appropriate Government to prescribe procedure to enable the licensee to carry out the specified works. This Section inter alia lays down that in order to carry o
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ction 67 of the Electricity Act. It also lays down lay down the procedure for fencing, guarding and other safety measures relating to the works and the immediate reinstatement of the affected areas and manner of restoration and the payment of the cost of reinstatement to the authority etc. The key provisions laid down in this connection are summarized hereunder: *Rule 11 of the Electricity Work Rules provides that licensee shall be liable to deposit an amount for restoration and maintenance of the affected areas. * Rule 12 of the Electricity Work Rules provides that the distribution licensee shall carry out the restoration and maintenance of the property affected by the works carried out by the distribution licensee. * Proviso to the Rule 12 of the Electricity Work Rules provides that where the restoration work is carried out by the concerned local authority, payment may be recovered by the local authority from the distribution licensees. * Rule 13 of the Electricity Work Rules provide
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Reinstatement Charges: Flat rates applicable for arriving a! reinstatement charges for various road surface based on prevailing Unified Schedule of Rates as well as charges for using existing duct will he as per Annexure-A. These rates have been worked out considering the width of trench as 0.9M, average depth of 0.9M and 0.55M width of affected area of road on each side; i.e. the total width of road to be improved will be 2.4M as against 2,4M as per previous practice. In case, the excavation proposed by the distribution licensee is not included in the Annual Plan submitted with Municipal Authorities, the distribution licensee is liable to pay Additional Reinstatement Charges at the rate of 7% of the normal Reinstatement Charges. The relevant extract of the MCGM Trenching Policy have been vided provided below: 6. Reinstatement Charges Along with Reinstatement Charges: 50% Additional amount shall be obtained from the utility agency as security deposit which can be utilized to recover p
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lines. The relevant extract of the MCGM Trenching Policy have been provided below: 6A. Access Charges (Right ofway charges): In addition to the regular RI charges; access charges for right of way will be recovered by MCGM from all utilities which lay underground services below MCGM roads. Presently these charges will be recovered at the rate of ₹ 100/- Per Meter length of the cable s/conduits/ducts Per Year. The Access charges will be enhanced as and when it is felt expedient to MCGM, on demand from MCGM or rather proactively; the access charges shall be deposited year by year by the Utility agencies. The access charges will be applicable to all types of trenching works i.e. open cut trenching, HDD & Micro trenching. Applicable access charges in individual case shall be Informed to the applicant utility agency through demand note along with the reinstatement Charges. 10. Therefore, every distribution licensee would be required to make payment of reinstatement charges and acce
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ng of the year, the distribution licensees would also be charged Additional Reinstatement Charge of 7% over and above the normal Reinstatement Charges, access charges and security deposit. Copy of the in-principle approval wherein the Municipal Authorities have charged reinstatement charges, access charges and additional reinstatement charges is enclosed as Exhibit C. d) Further, whenever the security deposit made by the Applicant gets exhausted (either as adjustment against penalties or against the reinstatement charges), the Municipal Authorities issues letters directing the Applicant to make additional security deposit. Copy of the letter issued by Municipal Authorities is enclosed as Exhibit D. 11. It is to be noted that that the Applicant has made similar payments of reinstatement charges and access charges to other authorities namely Mumbai Metropolitan Region Development Authority (MMRDA) and Mira Bhayandar Municipal Corporation. STATEMENT CONTAINING THE APPLICANT S INTERPRETATI
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2017, it is clear that the following conditions should be cumulatively fulfilled: i) There should be service (Condition I) ii) Service should be provided by Central Government, State Government, Union territory, local authority or governmental authority (Condition Il) iii) Service should be by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution (Condition Ill) Condition 2.3 The reinstatement charges are collected by the Municipal Authorities towards the activity of restoration of roads which includes activities such as construction, alteration, repair and maintenance of roads. It is pertinent to understand whether the activity undertaken by the Municipal Authorities would constitute works contract and thereby services . 2.4 In terms of Section 2(119) of the CGST Act, works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, m
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ishad a District board and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act 2006: (e) a Regional council or a District Council constituted under the Sixth Schedule to the Constitution; f) a Development Board constituted under article 371 Of the Constitution; or (g) a Regional Council constituted under article 371A of the Constitution; 2.7 In terms of Article 243P read with 243S of the Constitution of lndia, a Nagar Panchayat, Municipal Council or a Municipal Corporation would constitute Municipality . Thus, Condition II in Entry 4 to NN 12/2017 stands fulfilled as the MCGM, MMRDA and Mira Bhayandar Municipal Corporation would be treated as local authority Condition III 2.8 The Condition Ill requires that the services should be by way of any activity in relation to any function entrusted to a municipalit
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trusted to them including those in relation to the matters listed In the Twelfth Schedule: (b) the Committees with such powers and authority as may be necessary 10 enable them to carry Out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule 2.11 The relevant entry of Twelfth Schedule of the Constitution of India is reproduced hereunder: (1)… (4) Roads and Bridges;… 2.12 As the services provided by the Municipal Authorities is towards restoration or reinstatement of the affected roads, bridges, etc. Condition Ill stands fulfilled. 2.13 Therefore, in view of the above, service of restoration of roads can be said to be provided by way of any activity in relation to any function entrusted to a municipality under Article 243 W of the Constitution and accordingly, reinstatement charges for restoration of roads collected by the Municipal Authorities can be said to be exempt from the applicability of GST. Access charges (right
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xable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction With each other in the ordinary course Of business, one of which is a principal supply; 2.16 Further, in terms of Section 8 of the CGST Act, the tax liability of a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply. 2.17 In the present case, the Municipal Authorities provide services of restoration of roads and also right of way to carry out excavation work. The services of giving right of way and restoration of roads are naturally bundled and are supplied in conjunction with each other in the ordinary course of business of granting permission to the licensee for carrying out the excavation works. Thus, it can be said that it would constitute a composite supply in terms of Section 2(30) of the CGST Act wherein the service of restoration of roads would be the principal supp
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thorities would be squarely covered by the Entry 4 to the Notification No. 12/2017 -Central Tax (Rate) dated 28.06.2017 ( NN 12/2017 ). From a perusal of Entry 4 to NN 12/2017, it is clear that the following conditions should be cumulatively fulfilled in order to avail such exemption: i) There should be service (Condition I) ii) Service should be provided by Central Government, State Government, Union territory, local authority or governmental authority (Condition II) iii) Service should be by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution (Condition III) 2. Relying on the discussion and deliberations during the course of the hearing, we understand that it is undeniable that the Condition I and Condition Il are fulfilled in the instant case. The only doubts raised by Your Honour during the course of the hearing was whether the services provided by the Municipal Corporation ( local authority ) can be said to constitute
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bridges . 5. It is a settled position in law that the term in relation to is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context The Applicant has placed reliance on the following judicial precedents: * Doypack Systems Pvt Ltd vs. Union of India [1988 (36) ELT 201 (SC) = 1988 (2) TMI 61 – SUPREME COURT OF INDIA * Home Solution Retail India Ltd vs. Union of India [2009 (237) ELT 209 (Del.) = 2009 (4) TMI 14 – DELHI HIGH COURT 6. The Applicant submits that no activities or functions are explicitly specified as regards the subject matters listed under the Twelfth Schedule of the Constitution of India. Further, the functions entrusted to the municipality in relation to roads and bridges have not been defined anywhere in the Constitution of India or CGST Act, 2017 or any other Act. Thus, any activity carried out in relation to roads an
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y would also be covered by Entry 4 to NN 12/2017 and exemption should be allowed. 8. Further, as regards the argument that the functions or activities entrusted to Municipalities cannot be carried out for commercial purposes or business entities does not hold water. In this connection, the Applicant wishes to draw your attention to Entry 5 of the Twelfth Schedule to the Constitution of India which provides water supply for domestic, industrial and commercial purposes . Thus, from a perusal of the said entry, it is clear that the functions listed under the Twelfth Schedule are not restricted to be provided to public at large but it can also be provided for commercial purposes or industrial purposes to business entities. Hence, the services of the restoration of roads carried out for the Applicant would also get covered under the Twelfth Schedule to the Constitution of India. 9. Further, the Applicant also wishes to draw attention to the fact that the entries under NN 12/2017 can be clas
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o be used by general public at large. 11. Similarly, from a perusal of Entries covered by (iii) and (iv) above, it is clear that wherever the legislature wanted to exempt services provided to particular class of recipients, it has made explicit provisions to that effect. In the absence of such provisions in Entry 4, exemption cannot be denied in the instant case. 12. In view of the above, it is clear that wherever the legislature wanted to exempt services for use by general public or to be provided to some particular class of service recipient, it has made explicit provisions to that effect. In the absence of such provisions, exemption cannot be denied in the instant case. Thus, the exemption cannot be said to be available only when provided to public at large and the benefit of exemption is available even if the service is provided to particular business entity. 13. The Applicant also places reliance on the decision of M/s B.R. Enterprises vs. State of U.P. & Ors-MANU/SC/0330/1999
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different use of words in the two Articles is for a purpose, if the field of two Articles are to be the same. the same words would have been used. It is true, as submitted, that since trade is used both in Article 298 and 301, the same meaning should be given. To this extent, we accept it so but when the two Articles use different words, in a different set of words conversely, the different words used could only be to convey different meaning. If different meaning is given the field of the he different. so. When Instead of the words trade and commerce in Article 301. the words trade or business is used it necessarily has different and wider connotation than merely trade and commerce . Business may be of varying activities. may or not be for profit. hut it necessarily includes within is ambit trade and commerce so sometime it may be synonymous but its field stretches beyond trade and commerce, 14. In support of the above contention, reference may also be made to the following judgement
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to and the Authorities cannot add or substitute any word while construing notification either to grant or deny exemption. In this connection, reliance is placed on the Apex Court decision of Saraswati sugar Mills Versus Commissioner orc. Ex., Delhi-Ill – 2011 (270) E.LT. 465 (S.C.).= 2011 (8) TMI 4 – SUPREME COURT OF INDIA 16. In view of the above, it is clear that the benefit of exemption should be available to road restoration services provided by local authority to the Applicant. Exemption Notifications should be construed strictly 17. The Applicant also states that the Exemption Notifications are beneficial Notifications intended to benefit the industry and public at large and the same cannot be interpreted in a manner which renders the purpose of the Notification futile. It is a settled position of law that beneficial legislations should be interpreted liberally in order to extend the benefit of the statute to the assessee. In this connection, the Applicant places reliance on the
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there is no real contradiction amongst the judgments at all. The synthesis of the views is quite clearly that the general rule is strict interpretation while special rule in the case of beneficial and promotional exemption is liberal interpretation. The two go very well with each other because they relate to two different sets of circumstances. 18. The Applicant also relies on the case of Commissioner of Central Excise, Surat-l Versus Favourite Industries 2012 (278) E.L.T. 145 (S.C.) = 2012 (4) TMI 65 – SUPREME COURT OF INDIA , wherein the Apex Court held as under: 31. Moreover, a liberal construction requires to be given to a beneficial notification. This Court in Commissioner of Customs (Preventive) Mumbai V. M. Ambalal and Company, (2011) 2 SCC 74 2010 (260) ELT. 487 (S.C.) = 2010 (12) TMI 16 – Supreme court of India , (in which one of us was the party) has observed that the beneficial notification providing the levy of duty at a concessional rate should be given a liberal interpre
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y of GST. Access charges cannot be subject to GST 20. The Applicant further submits that the Municipal Authorities also recover access charges for the purpose of right of way over the road to carry out excavation work. It is pertinent to note that the access charges for access of roads payable in conjunction with reinstatement charges to carry out the excavation work. It is pertinent to note that the access charges for access of roads are payable in conjunction with reinstatement charges to carry out the excavation work. 21. In terms of Section 2(30) CGST Act, composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Further, in terms of Section 8 of the CGST Act, the tax liability of a composite supply comprising two or more suppl
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017. Therefore, GST would not be applicable on the access charges collected by the Municipal Authorities. In view of the above submissions, no GST would be leviable on reinstatement charges and access charges recovered by the Municipal Authorities. 03. CONTENTION – AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- It appears from the application that M/S. RIL, a private company engaged in business of generation, transmission and distribution of electricity claimed that reinstatement charges and access charges paid to Municipality for restoration work of roads damaged by excavation work undertaken by the applicant are exempted from GST in terms of entry no. 4 of the Notification No. 12/2017- Central Tax (rate) dated 28.06.2017. In support of their contention, they have argued that since such services provided by a governmental authority (Municipality) fall under the function entrusted to a municipality under article 243W of the Constitution, qualif
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roads caused by natural wear and tear in the interest of local public utility In the instant case, the service provided by the Municipality towards restoration of damaged roads caused by excavation work done by M/S. RIL is purely for commercial purpose, upon consideration, doesn t come under purview of Article 243 W of the Constitution and hence not exempted in terms of Notification No; 12/2017- Central Tax (rate) dated 28.06.2017. This service of restoration work is being provided by the local authority to the assessee for furtherance of their business and hence attracts GST. In terms of entry no. S of the Notification No. 13/2017- Central Tax (rate) dated 28.06.2017, the leviable GST is payable by the recipient i.e. M/S. RIL on reverse charge basis. 04. HEARING The case was taken up for preliminary hearing on dt.31.01.2018 when Sh. Gopal Mundhra (Advocate) attended alongwith Shi Thomas. K. D (DGM). On dt.28.02.2018, Shi Gopal Mundhra -(Advocate), Ms. Ginita Bodani (Advocate) and Sh T
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ce Infrastructure Ltd MCGM GST Number 27AAALM0042L3Z4 Sr. No. SAC / Activity Code Description of Activity Amount 1 RI FOR RELIANCE ENERGY LTD 63690.00 2 997212 ACCESS CHARGES FOR POWER CABLES 1000.00 64690.00 90.00 90.00 64870.00 c. There is also a Demand Note No. 783184406 dt.16.10.2017 which informs the applicant in response to their application to undertake excavation in trench. The aforesaid amount has been informed. It is categorically mentioned that payment of reinstatement charges do not guarantee the grant of permission. d. The Permit issued for the location of the trench as specified therein states that simultaneous work order for reinstatement is issued to Ward Contractor and further that he will take up the work on the date of completion of the applicant s work mentioned in the permit or in phases as per clause no. 10 of the Permit. The applicant before us is Reliance Infrastructure Limited and the supply would be by the Municipal authorities. We may refer to the GST Act to
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he the person liable for paying the tax in relation to the supply of such goods or services or both The notification issued under the above sub-section has an entry thus- Notification No. 13/2017-Central/State Tax (Rate) In exercise of the powers conferred by sub-section (3) of section 9 of the Central/Maharashtra Goods and Services Tax Act, 2017, the Central/State Government on the recommendations of the council hereby notifies that on categories of supply of services mentioned in column (2) Table below; supplied by a person as specified in column (3) of the said Table, the whole of central / state tax leviable under section 9 Of the said Central Goods and Services Tax Act, shall be paid On reverse charge basis by the recipient Of the such services as specified in Column (4) of the said Table: Table Si No. Category of Supply of Services Supplier of service Recipient of Service (1) (2) (3) (4) 5 Services supplied by the Central Government, State Government, Union Territory of local aut
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tification issued for the purposes of section 9(3) of the GST Act, the applicant would be liable to pay tax in respect of the services received from the Municipal authorities. And therefore, the questions would have to be entertained. We begin to discuss the facts and the questions posed. Question 1 Whether reinstatement charges paid to Municipal Authorities would be liable to GST? We deal with the question by looking at the arguments of the applicant. It has been contended that the service falls under entry 4 of Notification No. 12/2017 -Central/State Tax (Rate) dated 28.06.2017. We shall reproduce the said entry thus- Si. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Service Rate (per cent.)/CGST+MGST=IGST] Condition 4 Chapter 99 Services by Central Government, State Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the constitution
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hority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule. The word Municipality is defined in the Constitution in the definitions in Article 243P(e)A As Municipality means an institution of self government constituted under article 243Q; Article 243Q says thus- 243Q (1) there shall be constituted in every State,- (a) a Nagar Panchayat (by whatever name called) for a transitional area, that is to say, an area in transition from a rural area to an urban area; (b) a Municipal Council for a smaller urban area; and (c) a Municipal Corporation for a larger urban area, in accordance with the provisions of this Part: ………………………………………………….. Since there is a reference to the Twelfth Schedule, we also refer to the same thus – TWELFTH SCHEDULE (Article 243
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, bus stops and public conveniences. 18. Regulation of slaughter houses and tanneries. As can be seen, Roads is a matter listed in the Twelfth Schedule. so there is a function of a Municipality in relation to Roads . We have seen above that the Constitution defines Municipality as an institution of self-government. The function as entrusted by the Constitution in relation to Roads is the construction of roads for the use by the general public. These are sovereign functions. The applicant is inter alia engaged in the business of generation, transmission and distribution of electricity. This calls for laying and maintenance of the power lines and other incidental work which requires the digging up of trenches. The Municipal Authorities grant the needful permissions. However, these permissions come with charges for restoring the street or pavement which has been dug up. Thus, the activity in the present case is the charges recovered by the Municipal Authorities to restore that portion of
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s up the road and there is restoration required to be done. This restoration work would not result in performing of the sovereign function. The sovereign has already been performed by constructing the road or undertaking maintenance works roads. The restoration work can be equated neither to construction work nor to maintenance work as suo-motu undertaken by the Municipal Authorities. The restoration charges are also not in the nature that the Municipal Authorities are performing any job of construction for the applicant. The street or pavement or road that is dug up is a general road. In view of all above, we are of the firm view that it should not be disputed that the recovering of charges for restoring the patches which have been dug up by business entities of the nature as the applicant cannot be equated to performing a sovereign function as envisaged under article 243 W of the Constitution. Further, we find that there is specific entry in Notification No. 12/2017-Central/State Tax
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, they would not be eligible for any exemption under GST. We find that the applicant has made a whole lot of arguments to hold that the recovering of charges for the restoration of the street or pavements amounts to a service activity in relation to a function entrusted to a municipality under article 243 W of the Constitution. However, we find that the arguments fail to make a point. As regards the case laws, we only observe that the facts and provisions aren t in pari materia with those in the present case. We find that there is no other entry in the Schedule contained in the Notification No.12/2017-Central/State Tax (Rate) for services exempted from GST which would cover the impugned transaction. Neither is a specific entry for the impugned transaction in the Notification No. 11/2017-CentraI/State Tax (Rate) for services taxable to GST at various rates. In view thereof, the residuary entry no.35 of the Notification No.11/2017-Central/State Tax (Rate) covering services nowhere else c
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nt and we agree with the same. However, the applicant has made a general query as regards access charges paid to Municipal Authorities. We have no further information than the receipt raised and the policy guidelines of MCGM. To determine whether it is a composite supply by Municipal Authorities, the available information is insufficient as the question posed is in respect of Municipal authorities in general and not any specific Municipal Authority with complete details and therefore is not answered. 06. In view of the detailed deliberations held hereinabove, it is ordered thus – ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-11/2017/B- 14 Mumbai, dt. 21.03.2017 For reasons as discussed in the body of the order, the questions are answered thus – Question 1 Whether reinstatement charges paid to Municipal Authorities would be liable to GST? Question 2 Whether access charges paid to Municipal Authori
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