The BMRCL GST AAR Ruling (Order No. KAR ADRG 30/2025, dated 28-07-2025) held that Bangalore Metro Rail Corporation Limited is not a “Government Authority” under Notification 12/2017-CT (Rate). The Karnataka AAR also ruled that the concession activity under the MoU dated 04-06-2018, involving rights worth about ₹100 crore, is taxable and not exempt under Sl. No. 4.
What the BMRCL GST AAR Ruling Covers
The applicant sought clarity on two issues:
Whether BMRCL qualifies as a Government Authority under Para 2(zf) of Notification 12/2017-CT (Rate).
Whether its grant of concession (naming rights, advertising, and commercial exploitation rights) to a concessionaire under the 2018 MoU is exempt from GST.
The AAR examined ownership, functions assigned to BMRCL, and the nature of the concession activity before denying both claims.
Why BMRCL Did Not Qualify as a “Government Authority”
Under Para 2(zf), a Government Authority must:
Be set up by a legislature or established by Government with 90% or more participation; and
Perform a function entrusted to a Municipality under Article 243W of the Constitution.
Ownership Criteria
BMRCL meets the equity condition because it is a 50:50 joint venture of:
Government of India
Government of Karnataka
However, ownership alone is not sufficient.
Functional Test Under Article 243W
The decisive test is whether BMRCL performs a municipal function:
Municipal functions in the Twelfth Schedule include urban planning, roads, public transport, land use, and public amenities.
The AAR noted that metro rail operations are not entrusted to BBMP (the municipal corporation).
BMRCL operates under state and central mandates, not as a municipal body discharging municipal duties.
AAR Finding
BMRCL does not pass the Article 243W functional test.
Therefore, it cannot be considered a “Government Authority” for GST exemption purposes.
GST Exemption Claim Under Sl. No. 4: Why It Was Denied
What Sl. No. 4 Exempts
Services provided by a Government Authority in relation to a municipal function under Article 243W.
To qualify, all conditions must be satisfied:
Provider = Government Authority
Activity = Municipal function
Nexus = Service must relate directly to that function
AAR’s Reasoning
1. BMRCL is not a Government Authority
Since it failed Para 2(zf), exemption cannot apply.
2. Activity is commercial, not municipal
The MoU grants rights such as:
Station naming rights
Advertising rights
Leasing of commercial space
Development rights
Revenue-linked payments
Total value approx. ₹100 crore
These are business activities, not civic obligations.
3. MoU does not represent a municipal service
A concession for commercial exploitation is not a municipal function like:
Road maintenance
Public transport regulation by a municipality
Street lighting
Urban planning
AAR Decision
The concession activity is a taxable supply under GST. No exemption applies.
Illustrative Example: Commercial Leasing in Metro Stations
If BMRCL leases 500 sq. ft. of space to a retailer at a metro station, the activity:
Is a commercial lease
Is not a municipal duty
Attracts GST at applicable rates
Does not fall under Sl. No. 4 exemption
This aligns with AAR’s view: commercial gains from metro premises are taxable.
Key Points from the AAR (Bullet Summary)
Ownership
✔ Government shareholding >90% (combined)
✔ Set up by Government
✘ Functional entrustment by municipality missing
Functional Test
BMRCL works under State/Union directives
BBMP does not control metro rail operations
Metro rail is not a municipal responsibility
Hence, BMRCL fails Article 243W test
Why Exemption Was Denied
BMRCL is not a Government Authority
MoU represents a commercial concession
Concession rights are not municipal functions
GST must be paid on all related supplies
Compliance Notes for Accountants
Charge GST on concession fees, naming rights, advertising rights, and leases.
Review all concession agreements for taxable components.
Map revenue streams clearly: leasing, ad rights, and naming rights are business supplies.
Maintain MoU, valuation papers, and revenue-sharing documents for GST audit.
Until an appellate decision or policy change, GST must be charged on all concession revenue.
(For reference see Notification 12/2017-CT (Rate) and CBIC publications.)
Practical Tips
Break down concession fee invoices into supply categories.
Avoid assuming Government ownership equals automatic exemption.
Reassess GST positions whenever new station spaces or rights are granted.
Coordinate with internal legal teams before entering new concession MoUs.
Summary
The BMRCL GST AAR Ruling (KAR ADRG 30/2025) confirms that BMRCL is not a “Government Authority” under Notification 12/2017-CT (Rate). The AAR ruled that BMRCL does not perform any municipal function under Article 243W and therefore cannot claim exemption for services under Sl. No. 4.
The concession activities under the 2018 MoU, including naming rights, commercial space leasing, and advertising, are taxable. Public ownership alone does not create GST exemption.
Action Points
Apply GST on concession fees and rights.
Review MoUs for taxable elements.
Maintain evidence of classification decisions.
FAQs
1. What did the Karnataka AAR rule in BMRCL’s case?
It ruled that BMRCL is not a Government Authority and its concession activity is taxable.
2. Why is BMRCL not a Government Authority under GST?
It was not entrusted with municipal functions under Article 243W.
3. Is the ₹100 crore concession fee exempt?
No. It relates to commercial rights and is taxable.
4. Does leasing space inside metro stations attract GST?
Yes. Leasing for shops, ads, or naming rights is taxable.
5. Should BMRCL continue charging GST on concession fees?
Yes. Charge GST unless an appellate authority grants relief.
Karnataka GST AAR Ruling dated 28/07/2025: Bangalore Metro Rail Corporation Limited (KAR ADRG 30/2025)