Madras HC Reserves Judgment on GST RCM on TASMAC Bar License Fees.

Issue

Whether the license fee paid by retail bar operators to the Tamil Nadu State Marketing Corporation Ltd. (TASMAC) constitutes a “service supplied by the Government” under Notification No. 13/2017–CT (Rate), thereby making the bar operators liable to pay GST under the Reverse Charge Mechanism (RCM).

Facts

Retail bar operators filed writ petitions challenging the levy of GST under RCM on license fees they pay to TASMAC.
Petitioners’ Argument: The petitioners contend that TASMAC is a company, not the “State” as defined under Article 12 of the Constitution. They argue the GST notification for services supplied by the “Government” does not apply, making the RCM levy illegal.
Revenue’s Argument: The Revenue department argues that TASMAC is merely an agent of the State, and the license fee is consideration for a sovereign permission (the right to sell liquor). Therefore, it falls under the notification, and RCM is correctly applied.
The core of the dispute is whether TASMAC’s act of issuing licenses is a sovereign function or a standard commercial transaction.

Decision

The Madras High Court has heard arguments from both the petitioners and the respondents (Revenue and TASMAC).
The Court has reserved its judgment in the matter, with the pronouncement expected on November 15, 2025.
As of now, no final decision has been rendered.

Key Takeaways

Sovereign vs. Commercial: The case’s outcome hinges on whether the court classifies TASMAC’s licensing function as a sovereign act (making RCM applicable) or a commercial activity (potentially invalidating the RCM levy under this notification).
Definition of “Government” for GST: This judgment is expected to provide significant clarity on whether state-owned corporations (like TASMAC) fall within the definition of “Government” or “local authority” for the purposes of GST notifications.
Status: Sub Judice: The taxability of these license fees under RCM is highly contentious and remains sub judice (under judicial consideration) until the High Court delivers its final verdict.