Local Authority Under Section 2(69), and the DDA Clarification

Local Authority Under Section explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

A great many public bodies are called "local bodies" in ordinary speech and in their own statutes. Very few of them are local authorities under GST — and the difference decides exemptions, reverse charge and TDS.

Section 2(69) lists seven categories: a Panchayat (article 243(d)), a Municipality (article 243P(e)), a Municipal Committee, Zilla Parishad, District Board or any other authority entrusted with the control or management of a municipal fund or local fund, a Cantonment Board, a Regional or District Council under the Sixth Schedule, a Development Board under articles 371 and 371J, and a Regional Council under article 371A. The Finance Act, 2025, notified through Notification No. 16/2025-Central Tax dated 17.09.2025, w.e.f. 01.10.2025, inserted an Explanation defining "local fund" and "municipal fund". Circular No. 245/02/2025-GST dated 28.01.2025 confirmed that the DDA is not a local authority.

The seven categories

Section 2(69) — "local authority" means:

• (a) a "Panchayat" as defined in clause (d) of article 243 of the Constitution;
• (b) a "Municipality" as defined in clause (e) of article 243P;
• (c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with, the control or management of a municipal fund or local fund;
• (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;
• (e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;
• (f) a Development Board constituted under article 371 and article 371J — the reference to article 371J inserted by the CGST (Amendment) Act, 2018, notified through Notification No. 02/2019-CT, w.e.f. 01.02.2019; or
• (g) a Regional Council constituted under article 371A.

The list is exhaustive. CBIC FAQ question 5: "the definition of 'local authority' is very specific and means only those bodies which are mentioned as 'local authorities' in clause (69) of section 2… It would not include other bodies which are merely described as a 'local body' by virtue of a local law."

What the Finance Act, 2025 added

Limb (c) turns on the phrase "municipal fund or local fund" — and until 2025 neither term was defined, which made limb (c) the argumentative gateway for every body claiming local authority status.

The Finance Act, 2025, notified through Notification No. 16/2025-Central Tax dated 17.09.2025 with effect from 01.10.2025, inserted an Explanation:

"(a) 'local fund' means any fund under the control or management of an authority of a local self-government established for discharging civic functions in relation to a Panchayat area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called; (b) 'municipal fund' means any fund under the control or management of an authority of a local self-government established for discharging civic functions in relation to a Metropolitan area or Municipal area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called."

Three requirements now appear in both definitions, and each is capable of excluding a body:

• the authority must be one of local self-government;
• it must be established for discharging civic functions in a Panchayat, Metropolitan or Municipal area; and
• it must be vested by law with the power to levy, collect and appropriate a tax, duty, toll, cess or fee.

The third is the decisive one in practice. A body that receives budgetary grants, or that charges for services, does not thereby have a statutory power to levy and appropriate a tax.

Note also the correction in limb (c) itself — "municipal fund" replaced the earlier "municipal", by the same Finance Act, 2025 amendment.

The DDA clarification

The question the Handbook poses: "can authorities like The Delhi Development Authority (DDA) be treated as a 'local authority' as per section 2(69)?"

Circular No. 245/02/2025-GST dated 28 January 2025, on the 55th GST Council's recommendation, answered it:

"'Local Authority' means an authority which is similar to the elected self-governing body such as Municipal Committee and which is entrusted with the control and management of municipal or local fund. It is seen that DDA does not meet the requirement of local authority… Thus, as recommended by the 55th GST Council, it was clarified that DDA cannot be treated as local authority under GST law."

And the reasoning generalises. CBIC FAQ question 5 gives the class: "State Governments have setup local developmental authorities to undertake developmental works like infrastructure, housing, residential & commercial development, construction of houses… The Governments setup these authorities under the Town and Planning Act. Examples of such developmental authorities are Delhi Development Authority, Ahmedabad Development Authority, Bangalore Development Authority, Chennai Metropolitan Development Authority, Bihar Industrial Area Development Authority, etc. Such developmental authorities formed under the Town and Planning Act are not qualified as local authorities for the purposes of the GST Acts."

Two features distinguish them from a Municipality: they are not elected self-governing bodies, and they do not control a municipal or local fund in the sense the Explanation now defines.

The Ajay Hasia indicators

For genuinely borderline bodies, the Handbook offers the tests from Ajay Hasia v. Khalid Mujib Sehravardi, 1981 AIR 487, developed under Article 12:

• the entire share capital is held by the Government or its agencies or nominees;
• financial assistance of the State is so much as to meet almost the entire expenditure of the corporation;
• monopoly status is afforded to the authority in its area of activity;
• deep and pervasive State control exists over its functioning;
• the functioning of the authority is determined by, or subject to approval or override of, the State; and
• functions of a Government department are now vested in the authority.

Two further indicators the Handbook adds, not from the decision itself: the authority's employees are servants of the President or Governor with salaries charged to the Consolidated Fund; and on liquidation the entire estate vests with the State and flows into the Consolidated Fund.

These help identify a "State" for Article 12 purposes. They do not convert a body into a section 2(69) local authority, because that definition is a closed list — but they inform whether a body is an instrumentality at all.

Why the classification matters

The Handbook states the consequence directly: "A 'local authority' is also a 'person' for the GST law. A local authority would enjoy the same treatment as is received by a 'Government' such as in the case of supplies that shall be treated as neither a supply of goods nor a supply of services, requirement to deduct tax at source on supplies made to it, etc."

And on the other side: "as per entry at Sr. No. 5 of Notification No. 13/2017-CT(R) dated 28.06.2017, services supplied by local authority to a business entity are taxable on Reverse Charge (RCM) basis."

So a body that wrongly treats itself as a local authority claims exemptions it does not have, may fail to charge tax on services its customers should have paid forward, and its business-entity customers may wrongly discharge reverse charge on supplies that were never within entry 5.

A body wrongly treated as not a local authority loses the exemptions in entries 3, 3A and others, and its counterparties may miss the reverse charge that entry 5 imposes.

Key takeaways

• Section 2(69) is a closed list of seven — a body merely called a "local body" by a local law is not within it.
• The Finance Act, 2025, notified by Notification No. 16/2025-CT dated 17.09.2025 w.e.f. 01.10.2025, defined "local fund" and "municipal fund".
• Both definitions require an authority of local self-government, discharging civic functions, vested by law with the power to levy, collect and appropriate a tax, duty, toll, cess or fee.
• Circular No. 245/02/2025-GST (55th Council): the DDA is not a local authority.
• Development authorities under a Town and Planning Act — Ahmedabad, Bangalore, Chennai Metropolitan, Bihar Industrial Area and the like — are not local authorities.
• The Ajay Hasia indicators identify an instrumentality of the State but do not extend the closed list.
• A local authority is treated like Government for non-supplies and TDS, and its services to business entities attract reverse charge under entry 5.

Read next

• What Is "Government" Under GST — and What Is Not
• Governmental Authority and Government Entity, Defined
• Entry 6 and Its Four Exclusions: Services by Government

Disclaimer: Positions stated as on 5 September 2026, based on section 2(69) of the CGST Act, 2017 as amended by the Finance Act, 2025 notified through Notification No. 16/2025-Central Tax dated 17 September 2025, entry 5 of Notification No. 13/2017-Central Tax (Rate), Circular No. 245/02/2025-GST dated 28 January 2025, the CBIC FAQ series on Government services and Ajay Hasia v. Khalid Mujib Sehravardi, 1981 AIR 487, as reproduced in the ICAI Handbook on Government Supplies under GST (Including TDS Provisions), updated to 15 April 2026.