After the introduction of GST, the powers of the State governments and other regional authorities to raise additional taxes became limited as most of these levies have been morphed into GST. Interesting questions are being raised on the applicability of GST on some of these local levies. The Authority for Advance Rulings (AAR) in Uttarakhand was asked such a question by the Regional Forest Officer in Dehradun.

Marg Sudharan Shulk

The Regional Forest Office levies two types of “Shulk” (which translates to English as a “fee”) on mining companies operating in the forest region. “Marg Sudharan Shulk” (abbreviated to MSS) is charged and collected by the Forest Office from non -government, private and commercial vehicles engaged in mining work in lieu of use of forest road. MSS is collected for maintenance of forest road. Under GST, services by way of access to a road or a bridge on payment of toll charges are included in the list of exempted services.

A toll road is a public or private road for which a fee (or toll) is assessed for passage. It is a form of road pricing typically implemented to help recoup the cost of road construction and maintenance. In the present case, the AAR found that the MSS is nothing but toll charges collected by the applicant from the users for using forest road and the said toll charges are being used for the maintenance of forest road. On that basis they concluded that no GST is leviable as on date on the MSS charged and collected by the applicant.

Abhivahan Shulk

“Abhivahan Shulk” (abbreviated to ABS) is charged and collected by applicant in respect of forest produce carried out by a person. On going through “The Uttarakhand Transit of Timber and Other Forest Produce Rules 2012”, the AAR observed that a person who desires to obtain forest produce is required to be registered with the Forest Department after paying the applicable fee and the ABS is charged on the basis of quantum and quality of forest produce and the forest produce must be accompanied with a transit pass issued by forest authorities in this regard.

The AAR further observed that charges for carrying forest produce through road or water are different and determined according to quality and quantity. Therefore the ABS 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.

Under GST regime under Section 2(102) services means anything other than goods and all services but for list of exempted services as provided under Chapter 99 of GST Tariff, 2017 are liable for GST.

Since the services provided by the applicant do not find mention in the list of exempted services, the AAR concluded that the Forest Office is liable to pay 18 per cent GST on the ABS under Service Code 9997 and to be treated as "other services".

The conclusion reached by the Uttarakhand Bench of the AAR may open up questions on other local levies. Property taxes levied by the local municipalities contain all the ingredients of an Abhivahan Shulk — they vary depending on the type of property and all house owners should mandatorily pay it.

The Central Board of Indirect Taxes and Customs (CBIC) would do well to update the list of taxable and exempted transactions under GST as and when such decisions are made. Taxpayers are now aware that the list of exempt/taxable transactions cannot be small. The only demand that they can have is that the contents of these lists be clear and exhaustive.

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