Town Panchayat’s Leasing of Weekly Market to Tender Contractors Is Not a Supply of Goods or Services — Activity Covered Under Section 7(2)(b) Read With Notification 14/2017-CT(Rate): Tamil Nadu AAR

The Tamil Nadu Authority for Advance Ruling has held that the activity of a Town Panchayat in leasing the right to collect weekly market fees from merchants, farmers and the public to tender contractors for usage of open space for selling fruits, vegetables, domestic animals and birds is an activity covered under the functions entrusted to a Panchayat under Article 243G of the Constitution (Serial No. 22: Markets and Fairs) and is therefore treated as neither a supply of goods nor a supply of services under Section 7(2)(b) of the CGST Act read with Serial No. 4 of Notification No. 14/2017-CT(Rate). The ruling by Members R.V. Pradhamesh Bhanu and B. Suseel Kumar in TN/52/ARA/2026 (M/s Muthur Town Panchayat, decided 10.08.2026) follows the earlier rulings in Tiruppur Municipal Corporation (TN AAAR, 2021), Erode City Municipal Corporation (TN AAAR, 2021) and Kannivadi Town Panchayat (TN AAR, 2025).

The AAR held that the expression ‘in relation to’ employed in Notification 14/2017 is of wide amplitude and encompasses not only the actual performance of the constitutional function but also activities that are integral, incidental or ancillary to its effective discharge. The engagement of a contractor for execution of the activity does not alter its constitutional character or convert a statutory function of the Panchayat into an independent commercial activity — the tender contractors merely execute, on behalf of the Panchayat and subject to its control and prescribed conditions, the very function entrusted to the Panchayat under Article 243G.

- 2026-juristway.com-2525-AAR(Tamilnadu)-GST  |  AAR Tamil Nadu  |  TN/52/ARA/2026  |  10.08.2026