Whether the parking lot services provided by the Contractor appointed by the Market Committee, which is a Government Authority is exempt under Notification No.12/2017 as the parking lot activity is covered under Article 243 of the Constitution?

PJ/Case Law/2020-2021/3571

Pushpa Rani Pabbi (GST AAR Punjab) Advance Ruling No. AAR/GST/PB/011 dated 06.09.219
Brief Facts-The applicant has been appointed as a contractor for providing parking lot services at the place of the Market Committee at Jalandhar.
Issue-Whether the parking lot services provided by the Contractor appointed by the Market Committee, which is a Government Authority is exempt under Notification No.12/2017 as the parking lot activity is covered under Article 243 of the Constitution?
Applicant Contention- Applicant contended that since they are providing Parking lot services as a part of the functions entrusted to the market committee under Article 243W read with Twelfth schedule of the Constitution, therefore, the activity of maintenance of parking lot services provided by them as a contractor of the market committee is covered under Notification No. 12/2017 and is therefore NIL rated.
Moreover, they have been employed by the market committee to provide services of parking lot at the place of market committee on their behalf. Thus in a way they act as an agent of the market committee.
Reliance has been placed on the decision of the Hon’ble Supreme court though in different context in Larsen And Toubro Limited and Anr. vs State of Andhra Pradesh And Ors.
Though the market Committee (Mandi Board) primarily deals with the activities relating to agricultural produce but the maintenance of parking lots at Market Committee’s place to facilitate the agriculture should also be considered as part of other support services related to agriculture covered under SAC code 998619, which is also taxable at NIL rate under Notification No. 12/2017.
Reasoning by the authority and decision- According to 243Q of the Constitution of India, only Nagar Panchayats, Municipal Councils and Municipal Corporations are considered as Municipalities. However, certain urban areas, called industrial townships, an industrial establishment may provide municipal services and a municipality may not be constituted in that urban area. Further, in view of the above legal provisions and as clarified by the FAQ’s issued in respect of government services, the Mandi Board does not fall under the definition of local authority. A definition has to be read in its fulfilment and not in parts or out of context to suit a particular purpose.
The functions of Mandi Board is to establish markets for efficient marketing of agricultural produce by providing modern facilities in the mandis and to enforce the provisions of the Act, Rules Bye-laws framed there under. It also includes to establish a market therein providing such facilities for persons visiting it in connection with the purchase, sale, storage, weighment and processing of Agricultural produce concerned. The Board may from time to time direct these market committees to control and regulate the admission to the markets. Market Committees are service rendering agencies and their main source of income is market fee.
Mandi Board has not been established by the State Government for providing Parking Lot services to the people. It is purely discretionary and optional of the part of Mandi Board depending on their business requirements. It is pertinent to mention that functions entrusted to Mandi Board are not the functions entrusted to a Municipality.
Further, on perusal of agreement between the applicant and Mandi Board, it is established that the applicant has been appointed as Contractor for providing parking lot services at the place of Market Committee at Jalandhar for an amount of Rs. 2,72,97,000/- and the applicant is to recover the said amount by charging the vehicles entering the Market Committee area on rates ranging from Rs. 10/- for a two wheeler to Rs. 150/- for a Trolla, as fixed by the Market Committee. Thus, the Market Committee is earning revenue from the persons entering the parking area.
Moreover, it has been consistently held that any statutory authority which works on business principals, the fees collected by it cannot be considered as statutory fee. Only in case where the fee is collected towards sovereign functions and deposited with the Government revenue qualify to be outside the levy of any tax.
In the present case, although the Punjab State Agricultural Marketing Board was established on 26th May, 1961 under the Punjab Agricultural Produce Markets Act, 1961, its function cannot be considered as sovereign functions and accordingly the parking fees collected by them through the applicant does not acquire the nature of statutory fee so as to be outside the scope of any tax. Thus, the parking fees collected by the applicant are not in nature of statutory fees.
In view of above, it is held that the parking lot services provided by the Contractor appointed by the Market Committee, are not exempt under Notification No. 12/2017 as the Market Committee is not a Government Authority as per the definition provided in the clause 2(zt) of the notes appended to Notification No. 12/2017. The activity / services of parking provided by the applicant falls under heading 9967 and attracts GST @ 18% (CGST 9 % + SGST 9 %).

Prepared By- CA Preksha Jain

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PJ/Case Law/2020-2021/3571

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