GST on Annuities w.e.f. 01.01.

2023

CA Rajeev K. Sharma
86992-55289
98142-14503
 Issue- GST on Service by way of access to a road or a bridge on payment of annuity.

Background-1

• Construction and maintenance of the roads is normally sourced to

private persons.

• In many contracts for construction of Roads and Bridges,

consideration is paid by NHAI/Government by way of
permission to the contractors to collect tolls from the vehicles
plying on the road.

• Issue was whether GST was payable on ‘Consideration for

construction of road service received Annuities/in deferred annual
payments’ or it was exempt vide Entry Number 23A of Notification
Number 12/2017-Central Tax (Rate) dated 28.06.2017 (Exemption
Notification)
 Issue- GST on Service by way of access to a road or a bridge on payment of annuity.

Background-2

• When contractors collect tolls from the vehicles plying on the

road as consideration for construction of road service in deferred
annual payments/annuities, the issue as to whether GST was
payable on ‘Consideration for construction of road service received
Annuities/in deferred annual payments’ or it was exempt vide the
following entry, numbered 23A

NOTIFICATION NO. 12/2017-CENTRAL TAX (RATE), DATED 28-6-2017

Sl. Chapter, Description of Services Rate Condition

No. Section, (per
Heading, Group cent)
or Service Code
(Tariff)
23A Heading 9967 Service by way of access to a road or a bridge Nil Nil
on payment of annuity.
 Issue- GST on Service by way of access to a road or a bridge on payment of annuity.

Developments regarding Circular Issued by CBIC-subsequently held to be bad in law

• Circular No.150/06/2021-GST dated 17-6-2021 had clarified that

GST was payable on ‘Consideration for construction of road service
received Annuities/in deferred annual payments’.

• This Circular was held as bad in law in by Honorable High Court

Of Karnataka in DPJ Bidar - Chincholi (Annuity) Road Project (P.)
Ltd. V .Union of India

• Reason for being held bad is law was that it had the effect of
overriding the notifications bearing Nos.32 and 33/2017 dated 13-
10-2017

• Reference may be had to order of honorable HC of Karnataka in Writ

Petition Nos.22250 OF 2021/C/W AND 7233 OF 2022 (T-RES)
JULY 11, 2022. Citation: [2022] 140 taxmann.com 465
(Karnataka)]. Text of Order is being sent in next Message.
Issue- GST on Service by way of access to a road or a bridge on payment of annuity.

Position w.e.f. 01.01.2023

• CGST Notification number 15/2022- Central Tax (Rate) dated

30.12.2022 has been issued.

• CGST Notification No.12/2017-Central Tax (Rate), dated the 28th

June, 2017 has been amended and S. No. 23A and the entries
relating thereto, have been omitted w.e.f. 01.01.2023

• Now, GST shall be payable on ‘Consideration for construction of

road service received Annuities/in deferred annual payments’.

Now

Industry may be apprised of the taxability w.e.f. 01.01.2023

Please share comments & suggestions at

CA Rajeev K. Sharma
86992-55289
98142-14503
rks9814214503@gmail.com