applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity)
The Goods
and Services Tax Act, 2017 came into force in India
he Central Government has clarified in its Notification No. 150/05/2021-GST dated 17.6.2021 that GST is exempt on service, falling under heading 9967 (service code), by way of access to a road or a bridge on payment of annuity [entry 23A of notification No. 12/2017-Central Tax]. Heading 9967 covers “supporting services in transport” under which code 996742 covers “operation services of National Highways, State Highways, Expressways, Roads & streets; bridges and tunnel operation services”. Entry 23 of said notification exempts “service by way of access to a road or a bridge on payment of toll”. Together the entries 23 and 23A exempt access to road or bridge, whether the consideration are in the form of toll or annuity [heading 9967].
Services by way of construction of road fall under heading 9954. This heading inter alia covers general construction services of highways, streets, roads railways, airfield runways, bridges and tunnels. Consideration for construction of road service may be paid partially upfront and partially in deferred annual payments (and may be called annuities). Said entry 23A does not apply to services falling under heading 9954 (it specifically covers heading 9967 only). Therefore, plain reading of entry 23A makes it clear that it does not cover construction of road services (falling under heading 9954), even if deferred payment is made by way of instalments (annuities).
The relevant circular is
given below for ready reference:
CBIC-190354/36/2021-TRU
Section-CBEC
Government of
India Ministry of Finance
Department of Revenue
*****
North Block,
New
Delhi, Dated the 17th June,
2021
To,
The Principal Chief Commissioners/
Chief Commissioners/
Principal
Commissioners/ Commissioner
of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Sub–Clarification
regarding applicability of GST on the
activity of construction of road where considerations are received in deferred
payment (annuity)-reg.
Certain representations
have been received requesting for a clarification
regarding applicability of GST on annuities paid for construction of road where
certain portion of consideration is received upfront while remaining payment is made
through
deferred payment (annuity) spread over years.
2. This issue has been examined by the GST Council in its 43rd meeting held on
28th May, 2021.
2.1 GST
is
exempt on service, falling under heading 9967 (service code), by way of
access
to a
road or a bridge on payment of annuity [entry 23A of notification No. 12/2017-Central
Tax]. Heading 9967 covers
“supporting services in transport” under which code 996742 covers “operation
services
of National
Highways, State Highways, Expressways, Roads
& streets; bridges and tunnel
operation services”. Entry 23 of said notification exempts
“service by way of access
to a road or a bridge on payment of toll”. Together the entries 23 and
23A exempt access to road or bridge, whether
the consideration are in the form of toll
or annuity [heading 9967].
2.2 Services by way of construction of road fall under heading 9954. This heading
inter alia covers general construction services of highways, streets, roads
railways, airfield runways, bridges and tunnels. Consideration for construction of road service
may
be paid partially upfront and partially in deferred annual payments (and may be called annuities). Said entry 23A does not apply to services falling under heading 9954 (it specifically covers heading 9967 only). Therefore, plain reading of entry 23A makes
it
clear that it does not cover construction of road services (falling under heading 9954), even
if deferred payment
is
made by way of
instalments (annuities).
3. Accordingly, as recommended by the GST Council, it is hereby clarified that
Entry 23A of notification
No. 12/2017-CT(R) does not exempt
GST on the
annuity (deferred payments) paid for construction
of roads.
4. Difficulty if any, in the implementation of this circular may be brought to the notice
of the Board.
Yours faithfully,
(Rajeev Ranjan)
Under Secretary,
TRU
Email: rajeev.ranjan-as@gov.in
Tel: 011 2309 5558