GSTAT Holds GST Payable on Road Restoration Charges for Commercial Gas Pipeline Work:

Torrent Gas Limited is engaged in the supply of natural gas through a pipeline network has  obtained permission from the Public Works Department, Uttar Pradesh, to lay its gas pipelines. In November 2020, the company paid Rs 70,500 towards road restoration charges arising from the excavation of roads for its pipeline work.

The company subsequently paid Rs 8,462 as GST under the Reverse Charge Mechanism, comprising Rs 4,231 each towards CGST and SGST, in its GSTR-3B return for November 2020. On February 26, 2024, it filed a refund application under Section 54 of the Central Goods and Services Tax Act, 2017, seeking a refund of the tax paid. The adjudicating authority rejected the refund claim through Order-in-Original dated May 6, 2024. The Additional Commissioner (Appeals), CGST & Central Excise, subsequently upheld the rejection through Order-in-Appeal dated August 8, 2025.

Torrent Gas Limited contended that road restoration charges were compensatory in nature and did not constitute consideration for any supply of goods or services under Section 7(1) of the CGST Act, 2017. According to the company, the charges were collected to compensate for damage caused to public roads rather than as consideration for a service provided by the PWD.

The Revenue argued that the PWD had provided a specific road restoration service to the appellant at its request to facilitate the laying of a commercial gas pipeline. The charges were linked to the physical restoration work undertaken and therefore constituted consideration for a taxable supply under Sections 2(31) and 7(1) of the CGST Act, 2017.

The Tribunal observed that the recovery of charges based on the physical excavation and restoration work demonstrated a direct commercial connection between the service and the payment made. The activity therefore fell within the scope of “consideration” under Section 2(31) and “supply” under Section 7(1) of the CGST Act, 2017.

On the appellant’s reliance on Articles 243G and 243W of the Constitution, the Tribunal distinguished routine maintenance of public roads undertaken by government authorities in discharge of their public functions from targeted restoration work carried out for a particular commercial entity. It held that the constitutional provisions and the exemptions relied upon by the appellant could not be extended to such customised, request-driven services merely because road maintenance falls within the functions of local authorities.

Further, the Tribunal upheld the applicability of Notification No. 13/2017-Central Tax (Rate), under which services supplied by the Central Government, State Government, Union Territory or local authority to a business entity, subject to the specified exclusions, attract reverse charge liability on the recipient. Consequently, the Tribunal found no basis to interfere with the rejection of the refund claim under Section 54 of the CGST Act, 2017. The GSTAT dismissed the appeal filed by Torrent Gas Limited and upheld the Order-in-Appeal dated August 8, 2025, rejecting the refund claim of Rs 8,462.