Author: Ashwarya Sharma, Advocate, Co-Founder & Legal Head, RB Law Corp
Date: 12/05/2026
Introduction: The Constitutional Debate Beyond GST
One of the recurring constitutional questions emerging in the post-GST era is whether every levy connected with a taxable activity automatically stands subsumed within GST. The decision of the Hon’ble Bombay High Court in Manoj Madhav Limaye and Others v. State of Maharashtra & Ors. (2025 SCC OnLine Bom 5058) revisits this issue in the context of municipal hoarding licence fees and draws an important distinction between a “tax” and a “regulatory fee.”
The judgment assumes significance not merely for municipal corporations and the outdoor advertising industry, but for the broader constitutional framework governing legislative competence after the Constitution (101st Amendment) Act, 2016. It addresses complex questions involving delegated legislation, municipal powers, quid pro quo, constitutional entries under the Seventh Schedule, and the continued survival of regulatory levies after GST.
Running into more than 150 pages, the ruling is exhaustive and deeply constitutional in nature. However, at its core, the judgment answers a fundamental question:
Does GST extinguish every levy associated with advertisements, or do regulatory fees survive independently?
The Bombay High Court firmly answers in favour of the latter.
Factual Background: Challenge to Municipal Hoarding Licence Fees
The petitioners, comprising outdoor advertising entities and their association, challenged the levy of licence fees imposed by various municipal corporations in Maharashtra for erection and continuation of hoardings, sky-signs, billboards, kiosks and allied advertising structures.
The challenge arose under Sections 244 and 386(2) of the Maharashtra Municipal Corporation Act, 1949 (“MMC Act”), under which municipal authorities demanded licence fees for grant and renewal of permissions relating to outdoor advertisements.
According to the petitioners:
- The levy was, in substance, an “advertisement tax” disguised as a licence fee;
- After deletion of Entry 55 of List II by the 101st Constitutional Amendment, municipalities lacked legislative competence to continue such levy;
- The amounts collected were excessive and revenue-oriented rather than regulatory in nature.
The dispute therefore centered not merely on municipal powers, but on the constitutional validity of continuing such levies in the GST regime.
Petitioners’ Case: Regulatory Power Cannot Become Taxation
The petitioners argued that Sections 244 and 245 of the MMC Act were intended only to regulate public safety, skyline management and structural compliance.
Heavy reliance was placed upon the Bombay Provincial Municipal Corporation (Control of Advertisement and Hoarding) Rules, 2003, which dealt with:
- Structural specifications,
- Safety norms,
- Environmental standards,
- Licensing procedures.
According to the petitioners, these provisions demonstrated that the statutory framework was purely regulatory and therefore only nominal administrative charges could be recovered.
A major constitutional argument was founded upon the deletion of Entry 55 of List II relating to “taxes on advertisements.” The petitioners contended that once GST subsumed advertisement taxes, the State Legislature and municipal corporations lost competence to continue advertisement-related levies.
It was further argued that:
- Article 243X does not independently confer taxation powers;
- The absence of machinery provisions for assessment and valuation indicated that only minor regulatory charges were contemplated;
- The levy lacked sufficient quid pro quo;
- Municipalities were already compensated under the Maharashtra GST (Compensation to Local Authorities) Act, 2017.
Accordingly, continuation of the levy allegedly amounted to double recovery.
Municipal Corporations’ Defence: Regulatory Fees Survive GST
The municipal corporations defended the levy by drawing a sharp distinction between:
- Advertisement tax, and
- Regulatory licence fee.
According to the respondents:
- The impugned levy was never an advertisement tax;
- It was a regulatory fee connected with licensing, inspections, structural safety, environmental oversight and urban planning.
The corporations argued that:
- Deletion of a taxing entry does not automatically invalidate existing statutory provisions;
- Article 243X permits State Legislatures to authorize municipalities to levy taxes and fees;
- Modern jurisprudence no longer requires strict mathematical quid pro quo for regulatory fees.
The respondents also relied upon:
- Entry 5 of List II (local government), and
- Entry 66 of List II (fees in respect of matters within the State List).
Importantly, the State pointed out that the Maharashtra GST legislation repealed only the Maharashtra Advertisement Tax Act, 1967, and not Sections 244, 245 or 386(2) of the MMC Act.
Key Findings of the Bombay High Court
1. Regulatory Framework Under the MMC Act
The Court observed that Section 244 expressly prohibited erection or retention of sky-signs without prior permission from the Municipal Commissioner.
This licensing requirement automatically attracted Section 386(2), which authorized levy of licence fees.
The Court therefore held that the statutory scheme clearly contemplated regulatory supervision and validly empowered municipal corporations to collect licence fees.
2. Distinction Between “Tax” and “Regulatory Fee”
One of the most important aspects of the judgment is its detailed constitutional analysis distinguishing a “tax” from a “fee.”
The Court held:
- Taxation provisions under the MMC Act were separately structured;
- Sections 244 and 386(2) specifically characterized the impost as a “fee.”
The Court reaffirmed the settled principle that:
A regulatory fee does not lose its character merely because it incidentally generates revenue.
Importantly, the Court acknowledged that modern jurisprudence has substantially diluted the traditional doctrine of strict quid pro quo.
Where the dominant object is regulation in public interest, exact mathematical equivalence between fee collection and expenditure is no longer constitutionally necessary.
3. Regulation Extends Beyond Mere Licence Issuance
The Court accepted the corporations’ argument that regulation of hoardings involves:
- Structural inspections,
- Safety oversight,
- Urban planning,
- Environmental monitoring,
- Public convenience,
- Civic administration.
Unregulated hoardings, according to the Court, could create safety hazards and urban disorder.
Accordingly, the levy was intrinsically connected with a continuing regulatory mechanism.
4. GST Does Not Subsume Regulatory Fees
The High Court rejected the petitioners’ central argument arising from deletion of Entry 55 of List II.
The Court held that:
- The impugned levy was not an “advertisement tax”;
- Therefore, it did not derive legislative competence from Entry 55 at all.
Instead, competence was traced to:
- Entry 5 of List II (local government), and
- Entry 66 of List II (fees relating to State subjects).
A particularly important constitutional observation made by the Court was that entries in the Seventh Schedule are merely “fields of legislation” and not independent sources of legislative power.
5. Article 243X and Municipal Fiscal Autonomy
The Court also emphasized the constitutional significance of Article 243X, recognizing the need to preserve municipal fiscal autonomy within constitutional limits.
While the Court stopped short of treating Article 243X as an unrestricted source of taxation power, it acknowledged that municipalities must possess adequate financial and regulatory authority to discharge civic obligations effectively.
Final Conclusions of the Court
The Bombay High Court ultimately upheld the validity of the impugned licence fees and held that:
- Municipal corporations possess authority to levy licence fees for hoardings and sky-signs;
- The levy is a regulatory fee and not a tax;
- The levy was not subsumed into GST;
- Deletion of Entry 55 does not invalidate the fee;
- Strict quid pro quo is no longer necessary in modern regulatory fee jurisprudence.
Conclusion: A Significant Post-GST Constitutional Ruling
The judgment in Manoj Madhav Limaye is an important reaffirmation of constitutional principles governing the distinction between taxation and regulation.
At a time when GST-related constitutional disputes continue reshaping fiscal jurisprudence, the Bombay High Court has drawn a clear line between:
- sovereign taxing powers, and
- regulatory mechanisms necessary for municipal governance.
The ruling also reinforces an important constitutional principle:
Not every levy connected with a taxable activity automatically becomes subsumed within GST.
Perhaps the most enduring contribution of the judgment lies in its broader constitutional reasoning regarding legislative competence after the 101st Constitutional Amendment. The Court’s observations concerning regulatory fees, municipal autonomy and legislative entries are likely to influence future litigation extending well beyond municipal advertisement disputes.
Given its constitutional depth and extensive reasoning, the decision will remain an important precedent in both GST jurisprudence and municipal law for years to come.
📎 Attached PDF for detailed reading 👉
📎 Full Published Version: https://www.centaxonline.com/latest-news-updates/gst/105010000000028308/OPINION
(The author is a practicing advocate, Co-Founder and Legal Head of RB LawCorp.
He specializes in GST law. Suggestions or queries can be directed to
ashsharma@rblawcorp.in. The views expressed in this article are strictly
personal.)
