Apco Arasavalli Expressway Pvt Ltd vs The Additional Commissioner Of State Ta on 11 September, 2024
AI Legal Insights
This GST case law, Apco Arasavalli Expressway Pvt Ltd vs The Additional Commissioner Of State Ta, decided by the Andhra Pradesh High Court in 2024, addresses the core issue of determining the 'time of supply' for GST on annuity payments. These payments were received under a Hybrid Annuity Mode (HAM) agreement for a National Highway project. The Court set aside assessment orders not aligned with CBIC Circular No. 221/15/2024-GST, providing crucial guidance on the correct GST treatment of such payments and refund mechanisms. The ruling impacts road construction companies and clarifies the application of GST in infrastructure projects.
This ruling provides clarity on the GST liability for annuity payments under Hybrid Annuity Mode (HAM) agreements. Taxpayers in the infrastructure sector benefit from adherence to the CBIC circular, while the revenue department is bound by the specified valuation methodology.
- GST liability on HAM annuity payments determined by CBIC Circular No. 221/15/2024-GST.
- Assessment orders contrary to CBIC circular are invalid and subject to quashing.
- Refunds are mandated for taxes collected based on incorrect assessment orders.
- High Courts can intervene to correct GST assessments conflicting with CBIC clarifications.
- "Time of Supply" for annuity payments under HAM agreements is clarified.
QHow is GST calculated on annuity payments for highway projects?
GST on annuity payments under Hybrid Annuity Mode (HAM) agreements must be calculated according to the valuation methodology prescribed by CBIC Circular No. 221/15/2024-GST. Assessments contradicting this circular are invalid.
QWhat happens if I paid excess GST based on an incorrect assessment?
If you paid excess GST due to an assessment order that was later deemed incorrect by a higher authority like the High Court, you are entitled to a refund of the excess amount paid, in accordance with applicable GST laws and procedures.
Ruling Summary
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Outcome
The High Court allowed the Writ Petitions, setting aside the assessment orders and the appellate orders. It directed the respondent authorities to collect tax in accordance with the clarification issued by the CBIC Circular No.221/15/2024-GST dated 26.06.2024. Any amounts recovered on account of the impugned assessment or appellate orders are to be refunded to the petitioner in accordance with law. -
Core Issue
The core issue was the determination of the "time of supply" for services, specifically the annuity payments received by the petitioner for the construction, operation, and maintenance of a National Highway under a Hybrid Annuity Mode (HAM) concession agreement, and consequently, the date on which the Goods and Services Tax (GST) liability would arise for these annuity payments. -
Key Facts
- The petitioner, M/s. Apco Arasavalli Expressway Private Limited, is engaged in the construction and maintenance of roads and is a registered dealer under GST laws.
- It undertook the construction and maintenance of a section of National Highway No. 16 (approx. 54.19 km) under NHDP Phase-V on a Hybrid Annuity Mode (HAM).
- A Concession Agreement was executed with the National Highway Authority of India (NHAI) on 18.01.2018, requiring the petitioner to design, build, operate, and transfer the highway for a concession period of 15 years, receiving consideration during construction and on an annuity basis thereafter.
- GST on the construction portion was admittedly paid.
- A dispute arose regarding the timing of GST payment on the annuity installments.
- The assessing authority issued assessment orders for three distinct periods (2017-18 to Feb 2021; April 2022 to Nov 2022; April 2021 to March 2022), demanding significant GST (e.g., Rs. 41,09,65,364/- for the first period), by treating the GST on all annuity installments as payable at the inception of the concession period.
- The petitioner's appeals against these assessments were dismissed by the Additional Commissioner of State Tax, Appellate Authority, Vijayawada.
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Arguments (Taxpayer vs Revenue)
- Taxpayer (M/s. Apco Arasavalli Expressway Pvt Ltd): Contended that GST would be payable on the annuity received only on the date the invoice is raised for such purpose, or when payment is made, whichever is earlier.
- Revenue (Assessing Authority and Appellate Authority): Took the view that GST is payable on all annuity installments at the very inception of the concession period, arguing that the annuity relates to maintenance and management responsibilities commencing from the date of the concession period, and thus, the payment of GST cannot be deferred to the date of actual payment of annuity.
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Court’s Reasoning
The Court observed that the issue regarding the time of GST liability for services provided under Hybrid Annuity Mode (HAM) contracts has been settled. The Court relied on Circular No. 221/15/2024-GST, dated 26.06.2024, issued by the Central Board of Indirect Taxes and Customs (CBIC). This circular clarifies that the tax liability on the concessionaire under a HAM contract, including on the construction portion, would arise at the time of issuance of invoice or receipt of payments, whichever is earlier, if the invoice is issued on or before the specified date or the date of completion of the event specified in the contract. If invoices are not issued on time, the tax liability would arise on the date of provision of the service (i.e., the due date of payment as per the contract) or the date of receipt of the payment, whichever is earlier. In light of this definitive clarification by the CBIC, the Court concluded that the assessment orders and appellate orders, which adopted a contrary position, could not be sustained. -
Statutory References
- Andhra Pradesh Goods and Services Tax Act (APGST)
- Central Goods and Services Tax Act (CGST)
- Section 13 of the G.S.T. Act, 2017 (Time of supply of services)
- Section 13(2) of the G.S.T. Act, 2017
- Circular No. 221/15/2024-GST dated 26.06.2024, issued by the Government of India, Ministry of Finance, Central Board of Indirect Taxes and Customs.
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Precedents Cited
No judicial precedents were cited. The Court based its decision entirely on the clarification provided by the CBIC Circular No. 221/15/2024-GST dated 26.06.2024.