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The Southern Railways is liable to pay service tax for the license fee collected from the respective contractors and the respective contractors are liable to pay service tax for the collections made from the end users/customers in respect of the parking slot services.

Leviability of GST on licence fee – Parking of vehicles – The petitioners challenged the demand made by the Southern Railway to pay 18% of GST in respect of the license fee granted to the Private Contractors to run parking of vehicles. The court observed that all the provisions as well as the consequential Board orders and the clarificatory letters, it is made clear that license, rental, lease amounts to supply and as per Schedule II of the Act, license to occupy the land and renting of an immovable property, are also supply of services. The petitioners had agreed for the terms and conditions stipulated in the agreement and as per the said agreement, the licensee shall pay during the continuance of the license all cesses, rates, water charges, taxes and other charges or taxes in respect of the said premises. The court observed that there are two services involved in the entire transactions and the first service is from the Railway to the contractors and the second service is from the contractors to the customers/end users. As far as the exempted services under the provisions of the Act, are concerned provided by the contractors to the customers/end users, in such an event, the contractors are not liable to pay tax to the GST Department. However in respect of the license fee, the Railway is liable to pay service tax to the GST by collecting from the contractors on the license fee. However, exemption would be applicable only in respect of the services provided by the contractors to the customers/end users and in such cases, the contractors are not liable to pay taxes directly to the GST Department. Held that:- The Hon’ble High Court dismissed the petitions as devoid of merits.
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