Annuity received from NHAI for road construction services – Whether exempt from GST?
Here is an interesting case – GMR Pochanpalli Expressways Ltd v/s Additional Director [2024-VIL-1174-TEL] wherein the issue was whether the Annuity received from NHAI for road construction services is exempt from GST?
In this case, the petitioner entered into a contract with NHAI for execution, operation and maintenance of notified portion of National Highway under BOT annuity model for a period of 20 years. The construction work was completed in pre-GST regime whereas the maintenance contract continued until 2029. It was the contention of the petitioner that these annuities received by it were exempt from GST by virtue of Notification no. 32/2017 – Central Tax (Rate) dated 13th Oct’17.
The Court observed that –
1) Toll charges and annuity payments for services by way of access to a road or a bridge are exempted from GST under Notification no. 12/2017 – Central Tax (Rate) dated 28th Jun’17 and Notification no. 32/2017 – Central Tax (Rate) dated 13th Oct’17 respectively.
2) Circular no. 150/06/2021-GST dated 17th Jun’21, clarified that GST is exempt for services falling under SAC 9967 which covers – a) supporting services in transport, b) operation services of highways and streets, c) bridges and tunnel operation services; by way of access to a road or a bridge on the payment of toll or annuity. It further stated that construction of highways, streets, etc. covered in SAC 9954 are taxable in GST irrespective of whether the consideration is paid upfront or in the form of deferred annuity.
3) A close reading of the aforementioned notifications, suggest that services falling under 9967 are exempted whereas the services falling under 9954 are taxable. Further, the view as stated in the Circular is in congruence with the deliberation at the 43rd GST Council meeting wherein it was held that the exemption in the notifications does not cover annuity payments for construction service of roads.
4) With regard to the claim that the construction work was completed in pre-GST era, hence, GST should not levied, it was noted that it requires a fact-finding deliberation which cannot be done in a writ petition.
Based on these observations, the Court dismissed the writ petition but left the petitioner’s claim open to be presented before the appellate authority.
The copy of the order is as under:
