GST applies to municipal reinstatement and access charges linked to excavation works; exemption for municipal functions rejected.

Reinstatement charges recovered by municipal authorities for road restoration after excavation were treated as taxable under GST because they were not regarded as a sovereign municipal function performed for the public at large, and the claimed exemption for local authority services in relation to municipal functions did not apply. Access charges paid for right of way in connection with excavation were also held taxable, as the composite supply argument was not accepted and the charge did not fall within any specific exemption; the residuary taxable entry applied. Both charges were therefore brought within GST.

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Issues: (i) Whether reinstatement charges paid to Municipal Authorities for road restoration after excavation were liable to GST; (ii) Whether access charges paid to Municipal Authorities for right of way in connection with excavation were liable to GST.

Issue (i): Whether reinstatement charges paid to Municipal Authorities for road restoration after excavation were liable to GST.

Analysis: Entry 4 of Notification No. 12/2017-Central Tax (Rate) exempts services by a local authority only when they are by way of an activity in relation to a municipal function under Article 243W. The road restoration charges in question were held not to amount to performance of the sovereign municipal function of construction or maintenance of roads for the public at large, but only to recovery for restoring patches disturbed by a business entity. The service was also treated as falling outside the claimed exemption for services provided to business entities.

Conclusion: Reinstatement charges were held liable to GST and the issue was answered against the applicant.

Issue (ii): Whether access charges paid to Municipal Authorities for right of way in connection with excavation were liable to GST.

Analysis: The claim that access charges formed part of a composite supply with exempt road-restoration service was not accepted. The order recorded that the materials placed were insufficient to establish exemption for the charge as framed, and the transaction was not brought within any specific exempt entry. The residuary taxable entry was applied.

Conclusion: Access charges were held liable to GST and the issue was answered against the applicant.

Final Conclusion: The ruling determined that both reinstatement charges and access charges recovered by Municipal Authorities in the stated context are taxable under GST.

Ratio Decidendi: A charge recovered by a local authority for restoring excavation damage or granting access in connection with a business entity's works is not exempt merely because it relates to roads under the Twelfth Schedule, unless it is shown to be an activity covered by the municipal exemption in substance and within the notified conditions.

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