TaxTMI 
TaxTMI 
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.
Reverse charge mechanism
04 Jun 2020 
4 Replies 
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Reverse charge liability may apply to development charges when a development authority does not qualify as government or local authority.
Liability for service tax under reverse charge hinges on whether the Metropolitan Development Authority qualifies as a "governmental authority" or "local authority". Notification No.25/12 ST, as amended, exempts construction services to governmental authorities defined to include government established bodies with ninety percent or more participation that carry out municipal functions under Article 243W. The Finance Act sets out a separate definition of local authority; PAN alone is insufficient. CBEC guidance excludes many statutory bodies from Government or local authority status. If the MDA does not meet the municipal function and participation criteria, it is prima facie liable for service tax on development charges and specified services under RCM. (AI Summary)
Liability for service tax under reverse charge hinges on whether the Metropolitan Development Authority qualifies as a "governmental authority" or "local authority". Notification No.25/12 ST, as amended, exempts construction services to governmental authorities defined to include government established bodies with ninety percent or more participation that carry out municipal functions under Article 243W. The Finance Act sets out a separate definition of local authority; PAN alone is insufficient. CBEC guidance excludes many statutory bodies from Government or local authority status. If the MDA does not meet the municipal function and participation criteria, it is prima facie liable for service tax on development charges and specified services under RCM. (AI Summary)