HC Upholds Rs 16.36 Crore GST Demand, Says Toll Collection Rights Part of Taxable Construction Service

The Rajasthan High Court has sustained a GST demand of over Rs 16.36 crore against CG Tollway Limited, involved in the six-laning project of the Kishangarh-Udaipur-Ahmedabad highway under a BOT (Build-Operate-Transfer) model with NHAI.

CG Tollway Limited (petitioner), a road concessionaire, had signed a concession agreement with the National Highways Authority of India (NHAI) for the purpose of a six-laning project of the Kishangarh-Udaipur-Ahmedabad highway under a BOT (Build-Operate-Transfer) model. The GST authorities had claimed that the petitioner had not paid GST on the construction services provided by it to NHAI, as per the concession agreement signed by it. Consequently, a GST demand amounting to Rs 16.36 crore was raised on the petitioner, along with interest and penalty.

However, the company claimed that as per the concession agreement, it merely had the right to collect the toll post commercial operation of the project till the date of validity of the agreement. The toll collection is exempt from GST under Notification No. 12/2017. It was further mentioned that the actual construction work was performed by a subcontractor who had already paid all the GST liability, and therefore no further tax should be imposed.

However, when the case was taken before the Rajasthan High Court, the arguments raised by the petitioner were rejected. The court claimed that the concession agreement signed between the petitioner and NHAI explicitly reflects that the petitioner was responsible for designing, building, operating, and maintaining the highway in exchange for valuable rights, including toll collection rights and access to the project land. According to the Court, this arrangement amounted to a “barter” transaction and fell within the definition of “supply” and “works contract” under the GST law. Hence, the petitioner was liable to pay GST on the services provided by it to the NHAI.

The court further clarified that the petitioner was engaged in providing construction services falling under Heading 9954, on which no GST exemption is allowed. Exemption only applies to access to roads on payment of toll under Heading 9967. The court cited the CBIC Circular dated 17.06.2021 and a similar Telangana High Court ruling in a case based on a similar issue and held that toll collection in such BOT projects is part of deferred consideration or annuity for construction services and therefore taxable.

Accordingly, the GST demand, along with interest and penalty, was confirmed against the petitioner, and the writ petition was dismissed.