GST on Road Reinstatement and Access Charges Paid to Municipalities
The Maharashtra Authority for Advance Ruling decided that payments to municipal bodies for road restoration and access are subject to GST.
- Ruling
- GST-ARA-11/2017/B-14 Mumbai, dt. 21.03.2018
- Dated
- 21 Mar 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Reliance Infrastructure asked if road reinstatement charges are exempt from GST.
- The company also questioned if access charges for right of way are exempt.
- The Authority ruled both payments are taxable services under GST.
- The company must pay this tax under the reverse charge mechanism.
In short
The company asked if paying a municipal corporation to fix roads after digging them up for power lines counts as a tax-free government function. They argued that because municipalities are responsible for roads, these payments should be exempt from Goods and Services Tax (GST). The Authority disagreed, ruling that these are commercial services rather than sovereign government duties.
What has changed
How it worked before
Many utility companies assumed that payments made to local municipal bodies for road repairs were exempt from tax, viewing them as part of the municipality's public duty.
What has changed
The Authority decided these payments are taxable services. In practice, this means utility companies must pay GST on these charges using the reverse charge mechanism, where the business pays the tax directly to the government instead of the municipal body.
Who this affects
Utility companies, such as electricity, water, or gas providers, that frequently pay municipal authorities for road excavation, restoration, or access rights.
An example
Imagine a water utility company that pays a city corporation to restore a road after laying new pipes. The company might wonder if they need to pay GST on these restoration fees. Based on this ruling, the company should treat these fees as taxable services and pay the GST under the reverse charge mechanism.
What you should do
If you are in a similar position, you should review your payments to municipal bodies for potential GST liability. Remember that an Advance Ruling only binds the company that asked and its specific tax office; it is not a law that automatically applies to your business.
If you do nothing
If you assume this ruling does not apply to you and fail to pay the required GST, you risk penalties and interest charges during a tax audit. A tax officer may disagree with your interpretation and demand the unpaid tax along with fines. Relying on a ruling that does not legally bind you can lead to unexpected financial liabilities.
The terms explained
- Reverse charge mechanism
- A system where the person receiving a service pays the tax directly to the government, rather than the person providing the service.
- Sovereign function
- A core duty performed by the government that is essential to its role, such as maintaining public order or providing basic civic infrastructure.
- Taxable services
- Activities or work performed for a fee that are subject to Goods and Services Tax.
The ruling in detail
Authority for Advance Ruling
Reliance Infrastructure Limited
GST-ARA-11/2017/B-14 Mumbai, dt. 21.03.2018 · Maharashtra
Questions before the authority
- Whether reinstatement charges paid to Municipal Authorities would be liable to GST?
- Whether access charges paid to Municipal Authorities would be liable to GST?
Facts
The applicant is a distribution licensee under the Electricity Act, 2003, which requires them to excavate roads to lay and maintain underground electric supply lines. In doing so, they pay reinstatement charges to the Municipal Corporation of Greater Mumbai for restoring the road surface and access charges for the right of way. The applicant contended that these payments are exempt from GST as they relate to functions entrusted to a municipality under Article 243W of the Constitution.
Ruling
| Question | What the authority ruled |
|---|---|
| Reinstatement charges | Liable to GST Taxable under residuary entry no. 35 of Notification No. 11/2017-Central Tax (Rate) at 18% |
| Access charges | Liable to GST Answered in the affirmative |
The Authority ruled that both reinstatement charges and access charges paid to the Municipal Authorities are liable to GST. It concluded that the restoration of road patches by business entities does not constitute a sovereign function of the municipality. Consequently, these services are not exempt and are subject to GST.
Reasoning
The Authority reasoned that the restoration of road patches by utility companies is not a sovereign function performed by the municipality under Article 243W of the Constitution. It found that the services provided by the Municipal Authorities do not fall under the exemption provided by Notification No. 12/2017-Central Tax (Rate). Since no specific exemption applies, the services are taxable under the residuary entry of Notification No. 11/2017-Central Tax (Rate). The Authority also noted that the applicant is liable to pay tax on a **reverse charge basis** as per the notification issued under section 9(3) of the CGST Act.
Provisions relied on
- Section 9(3) of the CGST Act
- Article 243W of the Constitution of India
- Notification No. 12/2017-Central Tax (Rate)
- Notification No. 11/2017-Central Tax (Rate)
For the practitioner
This ruling clarifies that payments made by utility companies to municipal bodies for road restoration and right of way are **taxable services** and not exempt sovereign functions. It confirms that such entities are liable to pay GST on these charges under the **reverse charge mechanism**. Practitioners should note that this decision specifically rejects the argument that road restoration is a function entrusted to a municipality under the Twelfth Schedule.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/maharashtra_gst-ara-11_2017_dt_21.3.18_ril.pdf
Legibility of the scan, as read: high.
Prepared 15-10-2026.
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