GST Council may give some relief to roads and highways developers

Sources told CNBC-TV18 that the GST Council, on June 22, may clarify that GST payable by the developer (under the hybrid annuity model) for parts of the project under construction or maintenance will become due only when the invoice is raised or when the payment is made, whichever is earlier.

The hybrid annuity model is a private-public-partnership where the government pays, typically, 40% of the cost of construction in annual payments. The developers arrange for the rest of the money, which they recover from toll collections once the project is complete. 

The Council may also propose that “If invoices are not issued on or before the specified date or the date of completion of the contract, tax liability will arise on the date of provision of the said service or the date of receipt of the payment, whichever is earlier,” according to sources.

Similarly, the Council is likely to suggest that “the instalments/ annuity payable by NHAI to the builder also includes some interest component, then the GST will be applicable on interest as well,” sources added. The current rate of tax on such payments received is 12%.

Source: CNBC TV18