Weekly Market Fee Collection by Town Panchayat Not GST Supply: Tamil Nadu AAR

In re Muthur Town Panchayat (GST AAR Tamilnadu)

Summary: The Authority for Advance Ruling, Tamil Nadu examined whether Muthur Town Panchayat’s activity of leasing the right to collect weekly market entry fees to tender contractors is liable to GST. The Town Panchayat permits vendors, farmers and members of the public to use the open space for selling fruits, vegetables, domestic animals, birds and other goods on specified weekly market days. Under the tender arrangement, the contractor pays the Town Panchayat an agreed consideration for the right to collect the prescribed entrance fees from users and is required to issue receipts in the name of the Panchayat and comply with conditions prescribed by the Panchayat.

The applicant sought a ruling on whether this activity constitutes a function entrusted to a Panchayat under Article 243G of the Constitution and, consequently, whether it is covered by Section 7(2)(b) of the CGST Act, 2017 and Notification No. 14/2017-Central Tax (Rate) dated 28.06.2017. The applicant also relied upon earlier Tamil Nadu advance rulings concerning Tiruppur City Municipal Corporation, Erode City Municipal Corporation and Kannivadi Town Panchayat. The Authority admitted the application under Section 97(2)(b) and (g) of the CGST/TNGST Acts, concerning applicability of a notification and whether an activity amounts to a supply. It noted that the applicant is a Town Panchayat and therefore a local authority, and that the relevant activity concerns weekly markets and fairs, which are specifically listed at Item 22 of the Eleventh Schedule read with Article 243G of the Constitution.