GST reforms: No tax on toll collection by highway concessionaires; road maintenance tax liability clarified
The GST Council has clarified that highway concessionaires collecting exempt tolls will face no GST liability on the toll collection right, regardless of whether concession payments are made upfront or over time. It also said GST on road maintenance services will arise when funds are actually drawn against expenditure, not merely parked in escrow.
The GST Council has recently clarified tax rules surrounding highway toll collection, providing much-needed clarity for infrastructure projects. Under the new guidelines, concessionaires responsible for toll collection will not face any tax exposure, as the toll paid by users is exempt from tax. This exemption applies to both upfront and phased payment contracts, with both types treated equally.
According to the council, if the toll itself is tax-free, the right to collect it cannot be taxed either, as the concessionaire is only paying for the toll they expect to collect. The council further clarified that tax on road maintenance services will only become due when the concessionaire actually draws money against the incurred expenditure, eliminating confusion over whether merely setting aside funds in an escrow account amounts to a tax liability.
To implement this change, the council will issue a special procedure notification, which it plans to do soon. Kuljit Singh, a partner and national infrastructure leader at EY India, noted that the lack of clarity on whether GST applied to toll collection had led some risk-averse concessionaires to factor the tax into their prices.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
