Clarification regarding applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity) - GST - States - 8/2021 - TNGST

GOVERNMENT OF TAMIL NADU COMMERCIAL TAXES DEPARTMENT OFFICE OF THE COMMISSIONER OF COMMERCIAL TAXES EZHILAGAM, CHENNAI- 600 005 PRESENT: Thiru M.A. SIDDIQUE I.A.S , PRINCIPAL SECRETARY/ COMMISSIONER OF STATE TAX Circular No: 8/2021 - TNGST (PP6/GST-15003/28/2021) Dated: 21.09.2021 Sub: Clarification regarding applicability of GST on the activity of construction of road where considerations are received in referred payment (annuity)- regarding Ref: Circular No. 150/06/2021-GST, dated 17.06.2021 issued by Ministry of Finance, Department of Revenue, Government of India, New Delhi 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 G.O. (Ms) No.130, Commercial Taxes and Registration Department dated 13.10.2017 published in the Tamil Nadu Government Gazette, Extraordinary, in Issue No. 328 vide Notification No..II(2)/CTR/858(a-6)/2017, dated 13.10.2017] in 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 a/ia 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 G.O. (Ms) No.130, Commercial Taxes and Registration Department, dated 13.10.2017 published in the Tamil Nadu Government Gazette, Extraordinary, in Issue No. 328 vide Notification No.II(2)/CTR/858(a-6)/2017, dated 13.10.2017 does not exempt GST on the annuity (deferred payments) paid for construction of roads. Sd/-M.A.Siddique Principal Secretary/ Commissioner of State Tax