onda wets warant wrfreacot Phone : 08194-22334 (age afar site rol Sara) E-mail : chi@nhai.org aftdiverarataaa arg, 3.08. 8.2. B ai, nhaipiucta@gmail.com Ree (TTE.AY) (Prt, 202) Rag - 489 403, wale. yaaa y) National Highways Authority of India etn (Ministry of Road Transport and Highways) rouoapaceren seria . r 4 202), Chitadurga ornate NHAL/PIU-CPRIO°Eaning CTA BVE]3O1 5-38 788) 469 1 CN TTS 16-08220 19 To M/s.PNC Chitradurga Highways Pvt. Ltd., M/s.TPF Getinsa Euroestudios S.L. “Camp No.1, Sy. No.11/P1 & 12, In Association with Segmental Consulting Secbara Village, Hireguntanur (Hobli), & Infrastructure Advisory (P) Ltd. Chitradurga - 877 502. Chitradurga- 577502, /sIRCON Davangere Haveri Highway M/s.Aarvee _—Associates_-—Architects Ltd., House No.825/2, Plot No.35/36, 8% Engineers & Consultant Pvt, Ltd., Cross, 10 Main, Mruthunjaya Nagar, Ranebennuru-581 115. Ranebennur ~ 581 115. M/s. DBL Byrapura Chalakere Pvt. Ltd. M/s.TPF Getinsa Buroestudios S.L. Challakere. In Association with Segmental Consulting & Infrastructure Advisory (P) Ltd Challakere. Standard Operating Procedure for HAM Concessionaires due to Change in Law on account of introduction of GST Act, 2017 - Reg. Ref: NHAI HQ, New Delhi Policy Circular No.03.03.20/2019, Dt.29-07-2019 [(Decision Taken on File No.NHAI/F&A/GST/2018-19/SM (Vol.II)] Sir, Please find enclosed a copy of the Circular cited, wherein, NHAI HQ, New Delhi has issued a Policy Circular i.e. Standard Operating Procedure for HAM projects, due to Change in Law on account of introduction of GST Act, 2017. ‘The above Policy Circular shall be applicable for HAM projects only, where the last date for submission of bids was on or before 30-06-2017. For the projects, where last date of submission of bids was on or after 01-07-2017 on Hybrid Annuity Mode, no Change in Law would be applicable. In this regard, NHAI HQ, New Delhi, vide Policy Circular cited, submitted a example for calculation of relief due to Change in Law on account of introduction of GST for HAM Project. This is for your kind information and taking further action in the matter. Thanking you, Yours faithfully, Nao did (D Stinivasulta Naidu) GM (Tech) &Project Director, NHAI, PIU, Chitradurga. Copy to: RO, NHAI, Bangalore - for information please. manent inn enoneonvenatnyentiy enn naumnePNC.AOCK Corp. Office : G-5&6, Sector 10, Dwarka, New Delhi-110 075, Ph : 011-25074100/25074200, Website : www.nhal.gov.incase atret att osrrt Fare) BAR) Fax: 91-11-25093507 / 25009514 National Highways Authority of India (Ministry of Road Transport and Highways) ‘vis wa 6, Saet-10, weH, 3 Reet-110075 6.5 &6, Sector10, Dwar, New Deh: 1007S NHAW/Policy/Finance/Accounting and Taxes/2019 No. 03.03.20/2019 dated the 29" July, 2019 [Decision taken on File No. NHAI/FEA/GST/2018-19/SM (Vol. II] Subject: - Standard Operating Procedure for HAM Concessionaires due to Change in Law on account of introduction of GST Act, 2017 - reg. Background ‘ @. Goods and Service Tax Act, 2017 has been implemented in India with effect from 01.07.2017. The Act has subsumed various Indirect Taxes of both the Central & State Governments, such as Central Excise Duty, Service Tax, Central Sales Tax (CST) / State Value Added Tax (VAT), Additional Custom Duty (CVD) and Special Additional Duty (SAD) apart from Entry Tax and Octroi Charges etc. b, Subsequently, the NHAI had issued Standard Operating Procedures (SOP) for implementation of GST Act, 2017 on EPC Contract Payments. Accordingly, excel based templates for calculation of effect of GST incidence have been uploaded on public domain, i.e., NHAl website, ¢. In the above SOP, NHAl had also approved payment of GST treating the Construction Support of 40% in line with EPC Payments. Applicability This SOP is only applicable for HAM projects where the last date for submission of bids was on or before 30.06.2017. For the projects where last date of submission of bids was on or after 01.07.2017 on Hybrid Annuity Mode, no Change in Law would be applicable, Relevant Clauses of the Concession Agreement As per Article 35.1 of the Model Concession Agreement for HAM projects: “Increase in casts If as a result of Change in Law, the Concessionaire suffers an increase in costs or reduction in net after-tax return or other financial burden, the aggregate financial effect of which exceeds the higher of Rs. 1 crore (Rupees one crore) or 2% (two per cent) of the total Annuity Payments in any Accounting Year, the Concessionaire may so notify the Authority and propose amendments to this Agreement so as to place the Concessionaire in the same financial position as it would have enjoyed had there been no such Change in Law resulting in increased costs, reduction in return or other financial burden as aforesaid...” ALPIU-CHUTRADURGA nase ere ENE yhFurther, Clause 23.1 of the Model Concession Agreement states that: “The Parties further agree that the Bid Project Cost. specified hereinabove for payment to the Concessionaire shall be inclusive of the cost of construction, interest during construction, working capital, physical contingencies and all other costs, expenses and charges for and in respect of construction of the Project, save and except any additional costs arising on account of variation in Price Index, Change of Scope, Change in Law, Force Majeure or breach of this Agreement, which costs shall be due and payable to the Concessionaire in accordance with the provi Process for release of payment due to “Change in Law” on implementation of GST The following process shall be followed for release of payment to the Concessionaires of HAM Projects due to Change in’'Law on account of implementation of GST: 1. The Concessionaire will issue a letter fo the Authority notifying that a Change in Law has occurred. The Concessfonaire shall. also propose amendments to this Agreement so as to place the Concessionaire in the'same financial position as it would have ehjoyed had there been no such Change in Law. 2. Representatives from the Authority and the Concessfonaire shall. meet soon reasonably as practicable but no later than 30 (thirty) days from the date of notice and either agree on amendments to this Agreement or on any other mutually agreed arrangement. In the present case SOP may be agreed by the Concessionaire. 3. The Concessionaire shall subjriit thé breakup of {ts Bid Project Cost (BPC) into compotients which attract GST, and components which: do not attract GST, in the excel format. Such breakup should match the details provided in the Firtancial Agreements and Financial Model submitted at the time of Financial Close. 4, The Cohcessionaire shall submit relevant copies of GSTR 1 and GSTR 3B. The concessionaire shall further submit a detailed breakup of components of EPC, cost under different major heads (like Aggregates, Steel, Cement, Bitumen’etc...), and taxes applicable thereon prior to 30.06.2017. 5. A detailed calculation of impact of Change in Law due to introduction of GST so calculated in the excel format, along with a certificate from the Statutory Auditor, will be submitted by the Concessionaire to NHAI and the Independent Engineer. 6. As per GST Act, Profit component does not comes under the Negative list of items; hence, GST is applicable on the Profit component. 7. The following templates are enclosed for calculation of GST impact- a. Excel template for bifurcation of GST components (Annexure -1) \y10. 1. 12. 13. 14, 15, 16. 17. b. Excel template for Project Constituents - separately for Composite/Regular Output VAT Assessment (Annexure -Il) c, Example for calculation of relief due to change in taw on account of introduction of GST for HAM Project (Appendix-1) and calculation of impact for change in law due to GST to be released (Appendix-Il) The Independent Engineer will certify the quantities and work done details provided in the detailed calculation submitted by the Concessionaire The concerned RO / PD will cross-check the calculations submitted by the Concessionaire and release the amount calculated. RO/PD may ask the Concessionaire to provide electronic credit ledger by’showing the amount of input tax credit availed by Concessionaire. ). The Percentage band for each component of work in a project (Ref. Annex-lI of the Excel Templates) should be considered based on the IE’s assessment on final cost components of works in each project and approved by the concerned PD & RO At the time of Completion of Construction, before issuance of PCOD/COD, Concessionaire shall make a comprehensive reconciliation statement for GST at their end by following the procedure mentioned above, Once GST fs paid, it would riot be considered for revised Bid Project Cost and shall not form a part of annuities payments. The component distribution and percentage taxes as provided in the excel sheet are indicative/notional only. Project specific components and lax rales are lo be recorded properly as input in the excel sheet. The concessioner at the time of claiming payments for each milestone, must submit the authenticated copy of GST return submitted for last quarter and also declare any amendment/revision made for earlier returns. . Complete reconciliation to be made before payment of the GST amount for last milestone. The Project Director must ensure, if there is any reduction in cost on implementation of GST. In such cases recovery is to be effected, GST to be paid to the Concessionaire after providing a copy of GSTR 1 and GSTR 38. Further, comprehensive guidelines for submission of required documents against proof of deposition of GST has already been mentioned in NHAl policy circular no, 3.3.18/2017 dated 14.11.2017. If input tax credit is availed by the Concessionaire, Concessionaire may be asked to provide electronic credit ledger by showing the amount of input tax credit availed by Concessionaire. \s18. PIUs shall be advised to send the GST liability calculation file to GST cell, NHAI HQ for further scrutiny and vetting by GST Consultant. However, payment shall be released by respective PIUs with the approval of RO concerned. All the calculations as per Annexure and ‘Appendix as per Para 7 above along with supporting documents duly certified by PD/RO/IE/Concessionaire shall be forwarded for ‘in principle approval’ of HQ before fifteen days prior to certification/payment to be released against Milestone, payment as per the provision mentioned under Clause No. 23.4 of NCA. 49. The payment: made. urider “Change in Law”, as per the terms of Concession Agreement, is subject to anti-profiteering clause as per'the GST Act, 2017. 20. In case of any clarifications, RO/PD shall contact NHAl H@.for further guidance/direction. eu (sibs fan Nayak) CGM (FA) This issues with the approval of the Competent Authority.Appendix-1 Example for calculation of relief due to Change in Law on account of introduction of GST for HAM Projects Bid Project Cost: Rs. 999 Crores Components of Bid Project Cost which do not attract GST: ay pleas iseie) ii Evitetine foie) 1 Interest During Construction 64: | z Notional profit element/yield on equity/any other direct or B | indirect return to the Concessionaire | Total 7 7 Components of Bid Project Cost which attract GST: zien RE: finer) 1 EPC Cost including Contingencies, price escalation, and other expenses 881 as per Financing Agreements Operative Expenses Financing Charges Total (5 Add: GST on adjusted value of work done (refer to attached excel sheet) impact of Change in Law (5)-(4) oe - Note : The amount of GST payments towards impact of Change of Law to be paid considering the % of milestone based payment as defined under Concession Agreement Clause No. 23.4 of MCA. \sov _"Poseotou 99 Neus qunowe 3oU94y Atuo puE '4e9A BuRUNODDY Y>LE Wl 91019 191.AGF ccd) StL 6iZb ayeg_suoieiado 612) 02-6402 S2\_ 5 6VLE JO ZL JeD4SWIWOD selec SBUS'%__61-8L07, 289K LS GHEE IO Gb e10z 101 406 g BUOISONW SL6t'b SL62' 64-8102) SPA = GIL) J0 xGz. 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