In Re Tiruppur City Municipal Corporation (GST AAR Tamilnadu)
The Tamil Nadu Authority for Advance Ruling (AAR) addressed an application by Tiruppur Municipal Corporation regarding the GST applicability on entry fees collected for its onion market. The corporation had contracted out the right to collect these fees from vendors and farmers using 19 constructed mandis (shops/godowns). The core issue was whether this activity, conducted through a contractor, qualified as a function entrusted to a municipality under Article 243W of the Constitution, and thus, whether it was exempt from GST under Notification No. 14/2017-CT(Rate).
The AAR examined the corporation’s role and the nature of the contract. It noted that the fees collected were for using a public amenity, the onion mandis, which facilitated the daily market operations. The AAR determined that this activity fell under “public amenities,” a function listed in the Twelfth Schedule of Article 243W. Furthermore, the AAR considered previous rulings and appellate decisions related to the same corporation, which established that such fee collection activities, even when conducted through contractors, could be considered as functions of a local authority. Consequently, the AAR ruled that the corporation’s activity was indeed a function entrusted to a municipality and, therefore, was not a supply of goods or services under Notification No. 14/2017-CT(Rate). This exemption also extended to the contractor, provided they rendered the services as a “back-to-back” arrangement with the municipality.
