AAR: CPCB is a Local Authority and Its Statutory Environmental Fees are Exempt from GST.

AAR: CPCB is a Local Authority and Its Statutory Environmental Fees are Exempt from GST.

Issue

Whether the Central Pollution Control Board (CPCB) qualifies as a “Local Authority” or “Governmental Authority” under GST law, and consequently, whether the statutory fees it collects for issuing consents, licenses, and testing water samples are exempt from GST.

Facts

• The applicant, the Central Pollution Control Board (CPCB), is a statutory body constituted by the Central Government under the Water Act, 1974.
• It performs sovereign and regulatory functions under various environmental laws (Water Act, Air Act, Environment Protection Act).
• It collects fees for granting consents, licenses, registrations, and for analyzing water samples in its labs (some under an arrangement with the Ministry of Jal Shakti).
• The CPCB’s environmental protection and waste management functions align with the functions entrusted to municipalities under Article 243W and the Twelfth Schedule of the Constitution.
• The CPCB sought an advance ruling on its status and the taxability of these fees under Entry 4 of Notification 12/2017-CT (Rate).

Decision (Ruling of the AAR)

The Authority for Advance Ruling (AAR) ruled decisively in favour of the applicant (CPCB) on both counts:

1. Status: The CPCB, based on its constitution as a statutory body performing sovereign functions that align with municipal duties, qualifies as a “Governmental Authority or Local Authority” for the purposes of GST law.
2. Taxability of Fees: The services of issuing licenses, consents, and performing water testing are functions (like sanitation, waste management, and environmental protection) entrusted to a municipality under Article 243W of the Constitution.

Therefore, the AAR held that the CPCB satisfies both conditions required by Entry 4 of Notification 12/2017, and the fees collected for these statutory activities are exempt from GST.

Key Takeaways

• Two-Condition Test for Exemption: For services by a government body to be exempt under Entry 4, they must satisfy two tests:
  1. The provider must be a “Governmental Authority” or “Local Authority.”
  2. The activity must be a function entrusted to a municipality under Article 243W of the Constitution.
• CPCB’s Functions are Municipal Functions: The ruling confirms that environmental protection and pollution control are considered municipal functions, as listed in the Twelfth Schedule of the Constitution.
• Statutory Fees vs. Tax: Fees collected by a statutory body (like CPCB) for performing its non-commercial, regulatory, and sovereign duties are not subject to GST if they meet the exemption criteria.
• Broad Exemption: This exemption also applies to services (like water testing) rendered under an arrangement with another ministry (Ministry of Jal Shakti), as they are part of the CPCB’s core statutory mandate.