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TMI Blog2022 (7) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... naires towards construction and maintenance of the road. In short, the entire consideration for construction and maintenance of the road by concessionaires which is collected as toll charges is exempt from GST from 01.07.2017 and onwards. Annuity is paid to the concessionaires in lieu of toll charges. GST Council, in its 22nd meeting held on 06.10.2017 took note of the same and as entire toll charges were being exempted from GST has decided to recommend exemption of annuity also, which include the consideration received by concessionaires which is clear from the recordings in the minute book. The said recording makes it clear that it recommended treating annuity on par with the toll charges - Pursuant to the said meeting, the notifications no.32/2017 and 33/2017 dated 13.10.2017 have been issued by respondent no.1 wherein service by way of access to a road or a bridge on payment of annuity has been exempted from GST and no GST was being collected on the entire annuity being paid to the concessionaires which included the consideration towards construction as well as the service that they provide towards maintenance of the said road. The deliberation of GST Council in its meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and maintenance of the road. In other words, it consisted of the charges collected towards construction as well as services provided by the concessionaires. Subsequently, it was proposed that annuity, which was being paid by the highway authorities as a consideration to the concessionaires instead of permitting them to collect toll charges be also exempted from GST. In this regard, the minutes of 22nd GST Council meeting held on 06.10.2017 reads as under: Agenda item 13(iv): Issue of Annuity being given in Place of Toll Charges to Developers of Public Infrastructure exemption thereon 61. Introducing this Agenda item, the Joint Secretary (TRU-II), CBEC stated that while toll is a payment made by the users of road to concessionaires for usage of roads, annuity is an amount paid by the National Highways Authority of India (NHAI) to concessionaires for construction of roads in order that the concessionaire did not charge toll for access to a road or a bridge. In other words, annuity is a consideration for the service provided by concessionaires to NHAI. He stated that construction of roads was now subject to tax at the rate of 12% and due to this, there was free flow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he GST Council by certain government authorities as to whether the entire annuity paid to the concessionaries was exempt from GST or not, for which the GST Council in its minutes of the 43rd GST Council meeting held on 28.05.2021 clarified the same as follows: 15.33 .. it was also being clarified that the annuity paid as deferred payment for construction of roads/highways was not exempted from GST as the tolls or annuity in lieu of tolls are . 6. GST on annuities paid under the Hybrid Annuity Model Project for construction of roads: Committee discussed the request of Ministry of Road Transport and Highways regarding exemption on annuities paid under the Hybrid Annuity Model Project and has recommended that clarification may be issued that entry 23A of notification No.12/2017-CT(R) exempts services by way of providing access to road or bridge on payment of annuity. It does not exempt annuity paid for construction of roads. 5. Based on the same, a Circular bearing No.150/06/2021-GST dated 17.06.2021 was issued by respondent no.5 clarifying the same as follows: 2.1 GST is exempt on service, falling under heading 9967 (service cod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not annuity (deferred payments) paid for construction of roads. For the said reasons, they pray for dismissal of the writ petitions. 8. Admittedly, the toll charges collected by the concessionaries for construction, maintenance, operation and providing road access to the vehicle which ply on the road are exempted from GST by notification no.12/2017 dated 28.06.2017. The said exemption reads as follows: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition 23 Heading 9967 Service by way of access to a road or a bridge on payment of toll charges. Nil Nil 9. Though what is exempted is mentioned as service by way of access to a road or a bridge on payment of toll charges, the said toll charges is collected as consideration by the concessionaires towards construction and maintenance of the road. In short, the entire consideration for construction and maintenance of the road by concessionaires which is collected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of roads. The impugned circular has the effect of overriding the notifications bearing Nos.32 and 33/2017 dated 13.10.2017 and has to be held as bad in law. Nothing prevents respondent no.1 from imposing GST on the consideration paid to concessionaires like the petitioners on the payment received by them by way of annuity but that has to be done in the manner known to law. In the instant case, respondent no.1 has issued the notifications under Section 11 of the Central Goods and Services Tax Act, 2017 and Section 6 of the Integrated Goods and Services Tax Act, 2017 exempting the consideration received by concessionaires from highway authorities as annuity from GST. The clarification issued is contrary to the said notifications for the reasons recorded above. If respondent no.1 is desirous of altering the same, it has to issue fresh notifications amending its earlier notifications. 15. For the aforementioned reasons, the impugned Circular dated 17.06.2021 vide Annexure-N to the petition in W.P.No.22250/2021 and Annexure-S to the petition in W.P.No.7233/2022 is hereby set aside. Consequently, all actions pursuant to the said Circular is hereby set aside. The writ petitions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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