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Are Municipal Corporations taking people for ride?

 

NOVEMBER 06, 2017

By Jigar Shah

IN an article titled "Pay more for rides at city parks" carried by a well-known city tabloid, it is reported that the Municipal Corporation of Ahmedabad has implemented GST on ticket prices of rides at Corporation run public parks.

The Municipal Corporation of Ahmedabad is running and maintaining the public parks in various parts of the city of Ahmedabad under its administration. In some of the parks, various rides are installed and if someone wants to enjoy the rides, he can purchase the tickets and avail the benefit. As per the article published and the statement of the Chairman of the Standing Committee of the Municipal Corporation quoted, the prices of the rides are hiked up by almost 30% due to effect of GST.One learns that the GST rate applied is 28%.

It appears that the ticket prices of rides at Municipal Corporation run public parks are apparently exempted from GST and there need not be any price hike due to GST.

As per Section 11 of the CGST Act, 2017, the Central government has power to grant exemption from payment of GST on notified services. Similar powers are there with the State Government also and wherever the notification granting exemption from payment of GST is issued by the Central Government, the State Governments have followed suit.

The Central Government has issued notification number 12/2017- Central Tax (Rate) dated 28.06.2017 (as amended) granting exemption from payment of GST on notified services. Accordingly vide Sr. No.4 of said Notification, the services by Central Government, State Government, Union Territory, local authority or governmental authority is exempted from payment of GST provided that the said activity is entrusted to a municipality under Article 243W of the Constitution of India. For ease of reference, the said entry is reproduced below:

Sr. No.

Chapter, Section, Heading, Group or Service Code (Tariff)

Description of Services

Rate (per cent.)

Condition

04.

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.

Nil

Nil

Further, as per Article 243W of the Constitution, the legislature of a State may, by law, endow the Committees with such powers and authority 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.

A perusal of the matters listed in the Twelfth Schedule to the Constitution, the Entry No. 12 refers to "Provision of urban amenities and facilities such as parks, gardens, playgrounds."

In other words, providing urban amenities like parks, gardens and playgrounds are municipal functions as per Twelfth Schedule to the Constitution of India.

Therefore, a logical conclusion is that the services of providing rides at parks operated by Municipal Corporation is a municipal function and is granted exemption from payment of GST.

Further, another Entry in the Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 (as amended) merits consideration here. For ease of reference, the said Entry is reproduced below:

Sr. No.

Chapter, Section, Heading, Group or Service Code (Tariff)

Description of Services

Rate (per cent.)

Condition

6

Chapter 99

Services by the Central Government, State Government, Union territory or local authority excluding the following services-

(a) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory;

(b) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

(c) transport of goods or passengers; or

(d) any service , other than services covered under entries (a) to (c) above, provided to business entities .

Nil

Nil

The clause (d) in the above Entry is relevant for our purposes. It grants exemption from payment of GST on any service rendered by Central Government, State Government, Union Territory or local authority provided the services are not provided to any business entity.

In the present case, the question is applicability of GST on ticket prices of rides at Municipal Corporation run public parks. Obviously, such services are not availed by the business entity.

Therefore, if we consider the Entry No. 6 of the Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 (as amended), then also GST is not applicable on ticket prices of rides at public parks run by Municipal Corporation.

It seems that without considering the exemption notification, the Municipal Corporation has implemented GST on the ticket prices of rides at public parks run by it. The decision to implement GST on ticket prices of rides at public parks run by Municipal Corporation certainly needs review.

Perhaps, the CBEC should step in and clarify the matter for the benefit of all concerned.

(The author is Partner, M/s. Lakshmikumaran & Sridharan, Ahmedabad and the views expressed are strictly personal.)

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