AAR holds that reinstatement charges paid to Municipal authorities for restoring patches on street or pavement or road which have been dug-up by business entities such as the applicant, who is inter alia engaged in business of generation, transmission and distribution of electricity, are liable to GST on reverse charge basis.
Rejects applicant’s claim that such recovery of charges amounts to a service activity in relation to function entrusted to Municipality under Article 243W of Constitution and hence, exempt from GST.
Perusing Article 243W as well as definition of “Municipality” under the Constitution, AAR observes that function as entrusted in relation to ‘Roads’ is construction of roads for use by general public, and “The restoration work can be equated neither to construction work nor to maintenance work as suo-motu undertaken by the Municipal Authorities…”.
In view thereof, AAR holds that GST would be applicable at 18% under residuary entry no. 35 of Notification No. 11/2017-Central Tax / State Tax (Rate). Also holds that access charges for right of way, in addition to reinstatement charges, are exigible to GST but abstains from determining whether it is composite supply by Municipal Authority absent complete details.
Citation: [TS-170-AAR-2018-NT]