The Central Board of Indirect Taxes and Customs ( CBIC ) has today issued a circular clarifying that GST is applicable on annuities (deferred payments) paid for the construction of road where a certain portion of the consideration is received upfront while the remaining payment is made through deferred payment (annuity) spread over years.
The circular is issued as per the outcome of the GST Council meeting held on 28th May 2021.
As per the relevant notification exempting GST services, heading 9967 exempts GST on service by way of access to a road or a bridge on payment of annuity.
Heading 9967 covers “supporting services in transport” under which code 996742 covers “operation services of National Highways, State Highways, Expressways, Roads & streets; bridges and tunnel operation services”. Entry 23 of said notification exempts “service by way of access to a road or a bridge on payment of toll”.
The Board said that this heading inter alia covers general construction services of highways, streets, roads railways, airfield runways, bridges, and tunnels. “Consideration for construction of road service may be paid partially upfront and partially in deferred annual payments (and may be called annuities). Said entry 23A does not apply to services falling under heading 9954 (it specifically covers heading 9967 only). Therefore, the plain reading of entry 23A makes it clear that it does not cover the construction of road services (falling under heading 9954), even if deferred payment is made by way of installments (annuities). 3. Accordingly, as recommended by the GST Council, it is hereby clarified that Entry 23A of notification No. 12/2017-CT(R) does not exempt GST on the annuity (deferred payments) paid for the construction of roads,” it added.
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