Andhra Pradesh HC Sets Aside 18% GST Levy on Public Road Works, Orders Fresh Assessment Based on IALA Certificate [Read Order]

TheAndhra Pradesh High Court has set aside an adjudication order that imposed 18% of Goods and Services Tax (GST) on public road works. The court has ordered a fresh assessment based on the certificates issued by the Executive Officer of the Industrial Area Local Authority (IALA)

The petitioner, RK Infracorp Private Limited is a registered dealer under the GST Act and is engaged in the business of Works Contract.

The Department had conducted the audit in respect of the petitioners' books of accounts for the year 2021-22 and 2022-23.

After the audit the petitioner was issued with show cause notice in proposing to levy differential rate of tax @ 6% on the ground that the petitioner has wrongly paid output tax @ 12% instead of 18% on the Infrastructure Development Works (laying of internal roads) as per the Work Order and Agreements entered into with the 2nd respondent, Andhra Pradesh Industrial Infrastructure Corporation.

The order also levied interest under Section 50 and penalties quantified at 10%.

The petitioner argued that the applicable rate of GST was 12%, not 18%, on certificates issued by the Industrial Area Local Authority (IALA). Certificates issued by the Executive Officer of the IALA confirmed that the roads laid by the petitioner were public, facilitating industrial activity, movement of goods, and general public use.

The certificates emphasised that the roads were maintained for the benefit of industries, transport service providers, and the wider public, thereby falling within Entry 3 of Notification No. 24/2017, which prescribes a concessional GST rate of 12% for specified public infrastructure works.

Initially, the petitioner sought directions compelling APIIC to reimburse the differential tax of 6% so that it could remit the same to the tax authorities. However, APIIC refused, maintaining that the applicable rate was 12% and not 18%. The petitioner then amended its prayer to directly challenge the adjudication order itself, seeking reassessment in light of the IALA certificate and relevant legal precedent.

After considering submissions, the Division Bench comprising Justice R. RaghunandanRao and Justice T.C.D. Sekhar held that the petitioner had made out a case for reconsideration.

The Court observed that the IALA certificate was a material document that ought to have been considered in determining the applicable GST rate. Accordingly, the Court set aside the adjudication order only to the extent of levying 18% GST on road‑laying works.

The Court directed the Assistant Commissioner of State Tax to redo the assessment afresh, taking into account the IALA certificate and passing separate orders for each financial year. Importantly, the Court clarified that other components of the adjudication order, including tax on non‑road works, interest, and penalty, did not require interference.

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