GST Abolished Ad Tax, Doesn't Bar Municipal Licence Fees on Hoardings: Bombay High Court

The Bombay High Court recently held that the introduction of the Goods and Services Tax regime does not take away the power of municipal corporations in Maharshtra to levy licence fees on hoardings and sky-signs. The court clarified that GST abolished only advertisement tax and not regulatory charges imposed under municipal law.

A division bench of Justice G S Kulkarni and Justice Advait M Sethna, made the observation while dismissing a large batch of petitions filed by outdoor advertising agencies, challenging the levy of licence fees on hoardings and sky-signs by the Pune Municipal Corporation.

It observed, “Thus, there being no repeal in regard to any powers conferred under the MMC Act qua charging of licence fee in relation sky-signs and hoardings in no manner stands affected. It thus cannot be said that the municipal corporation would cease to have any power to levy.”

The court further held that “the license fee for sky-signs/hoardings as levied by the municipal corporation is a regulatory fee and not a tax under the MMC Act much less an 'advertisement tax' falling under the erstwhile Entry-55 of List II.”

Therefore, the abolition of advertisement tax under the GST regime does not divest municipal corporations of their statutory authority to levy regulatory licence fees for hoardings and sky-signs.

The advertisers argued that once advertisement tax was subsumed under GST following the constitutional amendment, municipal bodies lost all authority to impose any charge connected with advertisements and that the licence fee was merely a tax in disguise.

The municipal corporation opposed the challenge by stating that the levy was imposed under Sections 244, 245 and 386(2) of the Maharashtra Municipal Corporation Act as a regulatory licence fee for controlling erection, retention and safety of hoardings. It contended that these statutory provisions were never repealed and continue to operate independently of the GST framework.

Rejecting the advertisers' argument, the court clarified that repeal provisions under the GST laws repealed only the Maharashtra Advertisements Tax Act, 1967, which dealt with levy of advertisement tax, and not the provisions of the MMC Act.

The bench observed, “What is not repealed or subsumed would obviously continue to operate and remain legal, valid and subsisting.”

The court further held that a regulatory licence fee need not satisfy strict quid pro quo and may legitimately include costs of inspection, enforcement and regulatory administration.

Referring to settled Supreme Court precedent, the bench observed that “insofar as a regulatory fee is concerned, the services to be rendered are not a condition precedent and the same does not lose the character of a fee, provided that the fee so charged is not excessive. Hence, the principle of “regulatory fee” is one which needs to apply in the municipal corporation levying licence fees for the purpose of advertisement, sky-signs and hoardings, as rightly contended on behalf of the municipal corporation.”

Holding that the GST regime has not diluted municipal regulatory powers, the court held that promulgation of GST laws in no manner whatsoever has affected either the legislative competence of the State Legislature or the authority of the municipal corporation to levy licence fees for sky-signs and hoardings.