GST Applicable on Interest Payments on Equated Yearly Annual Model: AAR:

GST Applicable on Interest Payments on Equated Yearly Annual Model: AAR The applicant is a company, M/S. Shenwa Infrastructure Private Limited is registered with an address, 303, Third Floor, Lotus B Wing, Near Maharashtra Electricity Board, Shahapur, Thane, Maharashtra, 421601. The company was created specially for the purpose of carrying out a road construction project. This project was given to it by the Public Works Department (PWD), Government of Maharashtra, under a special kind of contract called the Hybrid Annuity Model (HAM). The company was required to build and improve two specific roads in Maharashtra: From Shenva to Dehari (on Major District Road 64) — about 32.4 km, and From Titwala to Eranjad (on Major District Road 49) — about 32.5 km. The total cost to build the roads is called the Bid Project Cost (BPC). The payment was required to be paid in two parts: 1. During Construction (60% of the payment): PWD was required to pay 60% of the total payment in 5 stages, based on the physical progress of the work:

• 10% work done: 1st payment
• 30% work done: 2nd payment
• 50% work done: 3rd payment
• 75% work done: 4th payment
• 90% work done: 5th payment

2. After Completion (40% of the payment):

• Once construction is fully complete and the roads are open for use (called Commercial Operation Date or COD), the company will receive the remaining 40% of the project payment along with interest, spread out over 19 equal payments every six months for 10 years.

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Questions Asked by Applicant:

The initial application has been filed under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively] by M/S. Shenwa Infrastructure Private Limited. The applicant seeking the advance ruling asks the following questions: "Question 1: Is interest receivable on deferred payment in Equated Yearly Installment as per tender terms under the Annuity Model liable for payment of GST or not? Question 2: If yes, Classification of service and the applicable rate of GST payable?"

Answer: What Did Ruling Say?

In accordance with the Maharashtra Authority for Advance Ruling (MAAR): Answer 1: Yes, interest receivable on deferred payment in Equated Yearly Installment as per tender terms under Annuity Model is liable for payment of GST. Answer 2: Service is classified the same as that of the original taxable supply of "services of construction of road and maintenance ", and the applicable rate of GST shall be the same as that of the original taxable supply.