M/S. Apco Arasavalli Expressway ... vs The Assistant Commissioner St, on 11 September, 2024
AI Legal Insights
This GST case law from the Andhra Pradesh High Court addresses the contentious issue of GST applicability on annuity payments under Hybrid Annuity Mode (HAM) contracts. The core dispute revolved around determining the 'time of supply' for these payments. The court invalidated assessment orders that conflicted with CBIC Circular No. 221/15/2024-GST, which provides specific guidance on this matter. This ruling offers significant clarity to infrastructure companies and emphasizes adherence to CBIC circulars in GST assessments. It also affects refund claims related to wrongly paid taxes.
This GST case law clarifies the timing of GST liability on HAM annuity payments, providing relief to concessionaires by ensuring tax is levied based on the CBIC circular. Taxpayers in the infrastructure sector benefit from this ruling, while the revenue department must adhere to the circular's guidelines for future assessments.
- GST on HAM annuity payments is governed by CBIC Circular No. 221/15/2024-GST.
- Assessment orders contrary to the CBIC circular are liable to be quashed.
- Refunds are mandated for amounts collected based on set-aside assessment orders.
- “Time of Supply” for annuity payments is crucial in determining GST liability.
- Concessionaires under HAM contracts benefit from this clarity on GST obligations.
QHow is GST calculated on annuity payments under HAM contracts?
GST on annuity payments under Hybrid Annuity Mode (HAM) contracts is determined according to the guidelines outlined in CBIC Circular No. 221/15/2024-GST. This circular clarifies the 'time of supply' and the method for calculating the applicable GST.
QWhat happens if a GST assessment order contradicts a CBIC circular?
If a GST assessment order is found to be in contradiction with a CBIC circular, the order is liable to be quashed. Authorities must adhere to the CBIC circular's guidance in future assessments and follow the prescribed procedures.
QAre refunds available for excess GST paid due to incorrect assessment orders?
Yes, if excess GST has been paid due to incorrect assessment orders that have been subsequently set aside, the taxpayer is entitled to a refund of the excess amount paid. The refund process must adhere to established legal procedures and timelines.
Ruling Summary
1. Outcome
The Andhra Pradesh High Court set aside the impugned assessment orders and the appellate orders. The respondent authorities were directed to collect tax in accordance with the Central Board of Indirect Taxes and Customs (CBIC) Circular No. 221/15/2024-GST dated 26.06.2024. Any amounts recovered on account of the set-aside orders are to be refunded to the petitioner in accordance with law.
2. Core Issue
The core issue was the determination of the "time of supply" for the purpose of Goods and Services Tax (GST) liability on annuity payments received by a concessionaire under a Hybrid Annuity Mode (HAM) contract for the construction and maintenance of national highways. Specifically, when does the GST liability for these annuity payments arise – at the inception of the concession period for all future annuities, or upon invoicing or receipt of individual annuity payments?
3. Key Facts
- M/s. Apco Arasavalli Expressway Private Limited (the petitioner) is a registered dealer engaged in the construction and maintenance of roads and national highways.
- The petitioner entered into a concession agreement dated 18.01.2018 with the National Highway Authority of India (NHAI) to design, build, operate, and transfer (DBOT Annuity/Hybrid Annuity) a section of National Highway No. 16 for a concession period of 15 years.
- Consideration was to be paid during the construction period and subsequently on an annuity basis for the concession period.
- GST on the consideration received for the construction portion was duly paid.
- The dispute arose regarding GST payable on the annuity payments. The assessing authority contended that GST on all annuity installments was payable at the very inception of the concession period, arguing that the annuity relates to maintenance and management responsibility commencing from that date.
- The petitioner maintained that GST on annuities would be payable only on the date the invoice is raised or payment is made, whichever is earlier.
- The assessing authority passed assessment orders for three periods (2017-18 to Feb 2021; April 2022 to Nov 2022; April 2021 to March 2022), raising significant demands (totaling over Rs. 68 Crores).
- The petitioner's appeals against these assessments were dismissed by the Additional Commissioner of State Tax (Appellate Authority).
- The petitioner filed these Writ Petitions challenging the appellate orders.
4. Arguments (Taxpayer vs Revenue)
- Taxpayer (M/s. Apco Arasavalli Expressway Pvt. Ltd.): Argued that under the GST Act, the time of supply for services, and thus the liability to pay GST on annuity payments, arises either on the date of issuance of the invoice for such annuity or on the date of receipt of payment, whichever is earlier.
- Revenue (Assistant Commissioner St and Additional Commissioner Of State Ta): Contended that the time of supply for services (annuity payments) should be treated as the date on which the concession period commenced. Their view was that the annuity is for the maintenance and management of the road, and this responsibility begins from the concession period's inception, hence all GST for annuities should be leviable at that point.
5. Court’s Reasoning
- The Court noted that the question of when the liability to pay GST would arise, particularly for annuity payments under HAM contracts, had been definitively settled by a circular from the Central Board of Indirect Taxes and Customs (CBIC).
- The Court referred to CBIC Circular No. 221/15/2024-GST, dated 26.06.2024.
- This circular clarifies that the tax liability on a concessionaire under a HAM contract (including on the construction portion) arises at the time of issuance of invoice, or receipt of payments, whichever is earlier.
- It further specifies that if invoices are not issued on or before the specified date or the date of completion of the event specified in the contract, tax liability would arise on the date of provision of the said 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 clear clarification from the CBIC, the Court concluded that the view taken by the assessing authority and the appellate authority was incorrect and contrary to the settled position.
6. Statutory References
- Section 13 of the Goods and Services Tax Act, 2017 (Time of supply of services)
- Section 13(2) of the Goods and Services Tax Act, 2017 (Stipulates earliest dates for time of supply of services)
7. Precedents Cited
- Government of India, Ministry of Finance, Central Board of Indirect Taxes and Customs Circular No. 221/15/2024-GST dated 26.06.2024. (No judicial precedents were cited; the issue was deemed settled by this clarification).