RCM on Payment of Municipal Plan Approval Charges by the Builder

[Rajendra Prasad]

Dear Sir

Whether RCM is applicable on Payment of Municipal Plan Approval Charges by the Builder to the Municipality.

[Atul Rathod]

Could fall under 243 w of the constitution. there by may fall under exemption notficaition.

[Himansu Sekhar]

Municipality is not Government. No question of RCM.

[KASTURI SETHI]

FAQ DATED 18.817

Question 19 : Whether services in the nature of change of land use, commercial building approval, utility services provided by a governmental authority are taxable?

Answer : Regulation of land-use, construction of buildings and other services listed in the Twelfth Schedule to the Constitution which have been entrusted to Municipalities under Article 243W of the Constitution, when provided by governmental authority are exempt from payment of tax.

Question 16 : What are the functions entrusted to a municipality under Article 243 W of the Constitution?

Answer : The functions entrusted to a municipality under the Twelfth Schedule to Article 243 W of the Constitution are as under :

(a) Urban planning including town planning.

(b) Regulation of land-use and construction of buildings.

(c) Planning for economic and social development.

(d) Roads and bridges.

(e) Water supply for domestic, industrial and commercial purposes.

(f) Public health, sanitation conservancy and solid waste management.

(g) Fire services.

(h) Urban forestry, protection of the environment and promotion of ecological aspects.

(i) Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.

(j) Slum improvement and upgradation.

(k) Urban poverty alleviation.

(l) Provision of urban amenities and facilities such as parks, gardens, playgrounds.

(m) Promotion of cultural, educational and aesthetic aspects.

(n) Burials and burial grounds; cremations, cremation grounds; and electric crematoriums.

(o) Cattle pounds; prevention of cruelty to animals.

(p) Vital statistics including registration of births and deaths.

(q) Public amenities including street lighting, parking lots, bus stops and public conveniences.

(r) Regulation of slaughter houses and tanneries.

AI Summary

Reverse Charge Mechanism may not apply to municipal plan approval charges when municipal services are tax exempt.
Whether the Reverse Charge Mechanism applies to municipal plan approval charges is debated; one view cites constitutional entrustment under Article 243W and an exemption notification suggesting non-application of reverse charge, while an authoritative FAQ states that services relating to regulation of land-use and building approvals entrusted to municipalities and provided by a governmental authority are exempt from tax, supporting a municipal services exemption rather than reverse charge liability.