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Dr. Sanjiv Agarwal By: Dr. Sanjiv Agarwal
March 14, 2019
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In certain cases, authorities charges fees or charge or surcharge, called by different names, from vehicles for maintenance of road and ancillary facilities. At times, it is in the nature of ‘toll charges. The question of taxability of such charges came up for deciding the taxability before the Authority for Advance Ruling  and Appellate Authority of Uttarakhand recently in the case of Divisional Forest Officer, Dehradun 2018 (6) TMI 430 - AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND

In the instant case, the assessee was a Regional Forest Officer (Forest Division Dehradun) and sought an advance ruling on the question whether GST is leviable on the ‘Marg Sudharan Shulk’ and ‘Abhivahan Shulk’ charged by Forest Division, Dehradun from the non-government, private and commercial vehicles engaged in mining work in lieu of use of forest road. The said mining is being undertaken at ‘Saung’ and ‘Jakhan Rivers’ falling under the jurisdiction of Forest Division, Dehradun under the supervision of “Van Vikas Nigam” after getting necessary approval from Environment Ministry, Government of India. In the application, applicant had requested for advance ruling on livability of GST of GST on (i) ‘Marg Sudharan Shulk’ and (ii) ‘Abhivahan Shulk’.

‘Marg sudharan shulk’ is charged and collected by applicant from non-government, private and commercial vehicles engaged in mining work in lieu of use of forest road, for maintenance of forest road ‘Abhivahan Shulk’ is charged and collected by assessee in respect of forest produce carried out by a person i.e. a person who desires to obtain forest produce is required to be registered with the forest department after paying applicable fee, the said ‘Abhivahan Shulk’  is charged on the basis of quantum and quality of forest produce and the said forest produce must be accompanied with a transit pass issued by forest authorities in this regard.

The Authority for Advance Ruling ruled that ‘marg sudharan shulk’ is nothing but toll charges collected by the assessee from the users for using forest road and the said toll charges are being used for the maintenance of forest road. Therefore it concluded that no GST is leviable as on date on the said ‘marg sudharan shulk’ charged and collected by the applicant. Further, ‘Abhivahan Shulk’ cannot be termed as toll tax and rather is a form of consideration received by the applicant in lieu of services provided to the person for carrying forest produce and since the services provided by the assessee are not mentioned in the list of exempted services, the applicant is liable to pay GST @ 18% on the said ‘Abhivahan Shulk’ under Service Code 9997 and to be treated as “other services”.

Appellate Ruling

Aggrieved by the Order passed by the Authority for Advance Ruling, the appellant preferred an appeal before the AAAR. The AAAR has confirmed the ruling vide Order dated 20.04.2018 and reported in IN RE : DIVISIONAL FOREST OFFICER, DEHRADUN (2018) 9 TMI 1647 (AAAR- Uttarakhand).

The main issues of contention, on taxability of Abhivahan Shulk, raised by the appellant against the Advance Ruling order, inter alia, are-

  1. that there is nothing in the definition which stipulates that even Govt. Fee collected under a specific statue shall also be covered in the definition of service.
  2. that Government fee is not covered under scope of service as detailed in Section 7 (a) & (b) of the CGST Act, 2017.
  3. that in case such fee is held exigible to GST then in such a scenario all Govt. Fees and levies charged under specific statutes shall become exigible to GST, which is not the intention of the legislature;
  4. that the provisions of Notification No. 13/2017-CT(R) dated 28.06.2017 shall continue to apply and the same shall be payable by the recipient of service under Reverse Charge mechanism. Further the recipient of service shall also be entitled to benefit of exemption as contained in Entry S.No. 9 of notification no. 12/2017 CT(R) dated 28.06.2017

It was observed that a fee is charged in lieu of some service granted to a particular class of persons from whom it is being charged. Such fees are to offset the expenses (partly or fully) incurred in rendering the said service and co-relation between the two with exact mathematical precision is not important and in some instances such as license fee, which are regulatory in nature, the quid pro quo also is not essential. The Abhivahan Shulk (transit fee) is different from the Marg Sudharan Shulk (both of which are collected by the forest department under statute of State Government) in as much as the latter is collected for the upkeep and maintenance of roads within the forest area and the same is collected from all the vehicles, whether loaded or empty. Thus the Marg Sudharan Shulk is used for the benefit of public in general who may use the roads of the forest area and not only to a particular class of people who are paying the said fee. The rates of Abhivahan Shulk, on the other hand, are fixed on the quantity of forest produce being transported. So, a vehicle entering a forest area will have to pay the Marg Sudharan Shulk even if it comes out empty. But the same empty vehicle will not be required to pay any Abhivahan Shulk, if it is coming out of the forest area without any forest produce. Thus, this fee is directly related to the quality and quantity of the forest produce. The Uttarakhand Forest Department was incurring expenses in maintaining the administrative machinery for collection of the Abhivahan Shulk and they are required, by the Uttarakhand Transit of Timber and Other Forest Produce Rules, 2012, to construct and maintain depots. All these expenses appeared to be met up from the collection in the form of Abhivahan Shulk and the fact that this fee is deposited in the consolidated general head does not in any way change its character of being a fee. In return for this fee, the forest department is providing the service of maintaining and regulating the forest produce and ensuring the continued availability of the forest produce and its safe transit through the jurisdiction of forest department. These services are restricted only to the persons who are carrying the forest produce and have paid the Abhivahan Shulk. Thus, only a particular class of people, who are registered with the forest department and paying the said fee, in terms of The Uttarakhand Transit of Timber and Other Forest Produce Rules, 2012, enjoy these services.

Abhivahan Shulk fulfils all the criteria, which are required to be established for a Government levy, for it to be termed as 'fee'. The very nature of it being a fee ensures that a quid pro quo has to be there and therefore, rendering of some form of service comes in built, which is also established as discussed above. Thus, this shulk collected against the services rendered, is liable to be taxed under the provisions of Goods and Service Tax Acts, unless otherwise exempted.

Merely the fact that the term ‘Government fee’ is not mentioned in the definition of services does not exclude it. The important factor is whether it falls under 'other than goods, money and securities' and the answer has to be obviously in negative. So, Government fees undoubtedly are covered by the definition of services.

Government fees are not specified in Schedule III of Section 7 and Abhivahan Shulk is also not covered by any notification for exception in terms of Section 7(2)(b) ibid. Hence, there remains no ambiguity about the taxability of Abhivahan Shulk.

Only such activities and transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council are not supply. Abhivahan Shulk is not covered under SI. No. 4 of the notification No. 12/2017-CT (R), dated 28.06.2017 since the entry applies to functions entrusted to Municipalities. Similarly serial entry No. 5 of the said notification relates to functions entrusted to Panchayat. On the other hand, Serial No. 6 of the said notification states that Services by the Central Government, State Government, Union territory or local authority excluding the following services - (a) ..................(b) ..................(c) ..................(d) any service, other than services covered under entries (a) to (c) above, provided to business entities are to be taxed at 'NIL' rates. Abhivahan Shulk does not fall under exclusion clauses (a) to (c) and hence they are to be treated as any service provided to a business entity, as per clause (d) and accordingly the fee does not fall under the category of 'NIL' rate. The Heading number 9997 at entry serial no. 35 of Notification no. 11/2017-Central Tax (Rate), dated 28.06.2017 reads - Other services (washing, cleaning and dyeing services; beauty and physical well-being services; and other miscellaneous services including services nowhere else classified) with the CGST rate of 9% [The corresponding entry in notification No. 08/2017- Integrated Tax (Rates), dated 28.06.2017 having IGST rate of 18%]. This entry serial is the residuary entry which covers all other services which are not elsewhere specified. As discussed above, the Abhivahan Shulk cannot be covered under notification relating to "NIL" rate nor does it correspond to any entry for services that are taxed at 24%. Hence, this fee has to be covered under the residuary Heading 9997 for other services with the tax rate of CGST@ 9%, SGST@9% and IGST @ 18%.

The AAAR, thus dismissed the appeal and affirmed the AAR ruling on taxability of two charges.


By: Dr. Sanjiv Agarwal - March 14, 2019