Reverse charge mechanism

[Kavali Ramanjeneyulu]

Metropolitan development authority is collecting development charges like Lay out permission charges, building permission charges, change of land use charges from the customers. The above athority is created by an act of state government and according to PAN it is a local authority. In this regard PL clarify whether the above authority is liable to pay service tax on development charges mentioned above and on legal services, rent a cab service, security service and works contract service under RCM.

[Rajagopalan Ranganathan]

Sir,

Please check whether Metropolitan development authority is registered under CGST Act, 2017 as taxable person. If it is so then such authority is liable to pay GST under reverse charge. Otherwise the supplier of service is liable to pay gst. There is not special exemption from payment of gst by such authorities.

[YAGAY andSUN]

In our view, Forward charge mechanism of GST will be applicable in this matter.

The definition of ‘local authority’ is very specific and means only those bodies which are mentioned as ‘local authorities’ in clause (69) of section 2 of the CGST Act, 2017. It would not include other bodies which are merely described as a ‘local body’ by virtue of a local law. For example, State Governments have setup local developmental authorities to undertake developmental works like infrastructure, housing, residential & commercial development, construction of houses, etc. The Governments setup these authorities under the Town and Planning Act. Examples of such developmental authorities are Delhi Development Authority, Ahmedabad Development Authority, Bangalore Development Authority, Chennai Metropolitan Development Authority, Bihar Industrial Area Development Authority, etc. Such developmental authorities formed under the Town and Planning Act are not qualified as local authorities for the purposes of the GST Acts.

[Kavali Ramanjeneyulu]

Sir, my regarding service tax . Whether Metropolitan development authority is liable to pay service tax on development user charges like building permission charges, layout permission charges and change of land use charges. And also, whether it is liable to pay service tax on rent a cab service , legal service, security service and works contract service. PL clarify sir.

AI Summary

Debate on GST Liability: Is a Metropolitan Development Authority Subject to Reverse Charge Mechanism Under CGST Act, 2017? A query was raised about whether a metropolitan development authority, deemed a local authority by state law, is liable to pay service tax on various charges and services under the reverse charge mechanism (RCM). One response suggested verifying if the authority is registered under the CGST Act, 2017, as a taxable person, which would make it liable for GST under RCM. Another response argued that the forward charge mechanism applies since such authorities are not classified as 'local authorities' under the CGST Act. The discussion focused on the applicability of service tax and GST on specific services and charges.